||Trust and Loyalty Study in Online Auction: From Transaction Cost Theory
||Institute of International Business
transaction cost theory
With the popularity of online auction and successful Initial Public Offer (IPO) of eBay.com, online auction has becoming the hottest issue of this century. Doubled with the growing population of online auction websites and intense competition between auction sites; to diminish information asymmetry and transaction risks of potential bidders, consumer trust and loyalty intention are the key elements. Why is trust so important? Bidders may wonder, will an unknown dot-com site or eBay seller who is a mere stranger ship items promptly with proper packaging; will the product be exactly the same one described online; or will the light purple skirt be as light as I expected. Previous to the launch of Internet, such problems were answered through personal and corporate reputation (Resnick, et al., 2000) and trust (Hoffman et al., 1998).
Therefore, in this study, we try to apply the transaction cost theory to identify the antecedents of e-trust in online auction environment, including interaction frequency and specific assets. How will the interaction between website and customer affect trust perceived and loyalty intention of the online customers? How will the involvement between online sellers and online customers affect customers’ behavior? Will online customers trust a higher reputation online seller than others? In order to answer these questions above, we collected online questionnaires from experienced online bidders and processed the data using regression analysis and step-wise regression to verify the online trust antecedents of auction buyers to sellers; to investigate the online trust antecedents of auction buyers to auction site; to explore the relationship between the trust to sellers and website loyalty intention; and to explore the relationship between the trust to auction site and website loyalty intention. The major research conclusions are listed below:
1. Interaction frequency dimension between consumer and website including interaction frequency and transaction frequency were both significantly positive effecting consumer trust and loyalty to the website. Asset specificity dimension in this research, including website reputation and consumer Transaction Specific Asset (TSA), had also shown significant explanation in consumer trust of the auction site.
2. Interaction frequency dimension between consumer and seller including interaction frequency and transaction frequency were both significantly positive affecting the consumer trust to the seller, so is consumer Transaction Specific Asset (TSA) and seller reputation affecting consumer trust of the seller.
3. Website reputation and the consumer involvement can establish mostly the consumer trust towards the auction site; while the seller reputation and the transaction frequency variables can ascertain mostly the consumer trust towards the seller.
CHAPTER 1 INTRODUCTION 1
1.1 Research Background 1
1.2 Research Objectives 4
CHAPTER 2 LITERATURE REVIEW 6
2.1 Auction 6
2.2 Trust 9
2.3 Transaction Cost Paradigm 12
2.4 Reputation 20
2.5 Loyalty 23
CHAPTER 3 RESEARCH METHODOLOGY 27
3.1 Research Framework 27
3.2 Research Hypothesis 28
3.3 Operationalization of Research Constructs 30
3.4 Sampling Process 33
3.5 Research Methodology 34
CHAPTER 4 RESEARCH ANALYSIS AND RESULT 35
4.1 Descriptive Analysis of Sample Demographics35
4.2 Reliability Analysis of the Major Variables39
4.3 Linear Regression Analysis 41
CHAPTER 5 CONCLUSION AND SUGGESTION 48
5.1 Research Conclusions 50
5.2 Research Contribution 52
5.3 Suggestion 53
5.4 Research Limitation and Suggestion for Future Research 54
Chinese Questionnaire 61
English Questionnaire 67
1. Akerlof, G. A. (1970), “The market for ΄Lemons΄: Quality under uncertainty and the market mechanism.” Quarterly Economics, (84), pp. 488-500
2. Allen, F. and G. R. Faulhaber (1988), “Optimism invites deception,” Quarterly Journal of Economics, (103), pp. 397-407
3. Anderson, E., and B. Weitz (1989), “Determinants of Continuity in Conventional Industrial Channel Dyads,” Marketing Science, (8), pp.310-323
4. Anderson, E., and J. A. Narus (1990), “A model of Distributor Firm and Manufacturer Firm Working Partnerships,” Journal of Marketing, (54), pp.42-58
5. Anderson, R.E., and S.S. Srinivasan (2003),”E-Satisfaction and E-Loyalty: A Contingency of Framework,” Psychology and Marketing, (20), pp.123-138
6. Ba, S. (2002), “Evidence of the effect of trust building technology in electronic markets: Price premiums and buyer behavior”, MIS Quarterly, Minneapolis, (26), pp. 243-268
7. Beam, C., A. Segev, and J. G. Shanthikumar (1996), “Electronic Negotiation through Internet based Auctions” CITM Working Paper 96 WP 1019, Dec, Walter A. Hass School of Business, Univ. of California Berkeley CA 94720.
8. Beam, C., A. Segev (1998), ”Auctions on the Internet: A Field Study”, CITM Working Paper 98 WP 1032, Nov, Hass School of Business, Univ. of California Berkeley CA 94720.
9. Brown, J. r., R. Lusch, and D. D. Muehling (1983), “Conflict and Power-Dependence Relations in Retailer-Supplier Channels,” Journal of Retailing, (59), pp. 53-79
10. Cannon, J.P. and Homburg C. (2001),”Buyer-Supplier Relationships and Customer Firm Costs,” Journal of Marketing, (65), pp.29-53
11. Chakravarti et al., (2002), “Auctions: Research Opportunities in Marketing,” Marketing Letters, (13), August 2002.
12. Chaudhuri, A. and M. B. Holbrook (2001), “The Chain of Effects from Brand Trust and Brand Affect to Brand Performance: The Role of Brand Loyalty,” Journal of Marketing, (65), pp. 81-93.
13. Churchill, G. A., Jr. (1979), “A Paradigm for Developing Better Measures of Marketing Constructs,” Journal of Marketing Research. Chicago: Feb. 1979. (16), pp. 64-73
14. Day, G. S. (1969), “A Two-dimensional Concept of Brand Loyalty,” Journal of Advertising Research, (9), pp. 29-35
15. Doney, P. M. and J. P. Cannon (1997), “An Examination of the Nature of Trust in Buyer-Seller relationships”, Journal of marketing, (61), pp.35-51.
16. Fieweger, K. (2002), “Online Auctions Expand the Universe for Buyers and Sellers, Consumers willing to take a slight risk get efficiency, convenience and an almost endless list of products”, The Los Angeles Times, Los Angeles, Calif., (11)Nov 16, 2000
17. Frazier, G., and J. Summers (1984), “Interfirm Influence Strategies and Their Application Within Distribution Channels,” Journal of Marketing(48), pp.43-55
18. Friedman, E. J., and P. Resnick (1999), “The Social Cost of Cheap Pseudonyms,” Working Paper, Rutgers University
19. Hoffman, D. L., T. P. Novak and M. Peralta (1998), “Building consumer Trust Online”, Communications of the ACM, (42), pp. 80-85.
20. Herschlag, M. and R. Zwick (2000), “Internet Auctions: a popular and professional literature review,” Quarterly Journal of Electronic Commerce, 1(2), pp.161-186.
21. Ganesan, S. (1994), “Determinants of long-term orientation in buyer-seller relationships,” Journal of Marketing, Chicago: Apr 1994. (58), Iss. 2, pp. 1-19
22. Garbarino, E. and M. S. Johnson (1999), “The different Roles of Satisfaction, Trust, and Commitment in Customer Relationships”, Journal of Marketing,(63), pp. 70-88
23. Grabner-Kraeuter, S. (2002), “The Role of Consumers’ Trust in Online-Shopping”, Journal of Business Ethics, Iss. 39, pp. 43-50
24. Heide, J. and G. John (1988), “The Role of Dependence Balancing in Safeguarding Transaction-Specific Assets in Conventional Channels,” Journal of Marketing, (52), pp. 20-35
25. Jacoby, J., and D. B. Kyner (1973), “Brand Loyalty vs Repeat Purchasing Behavior,” Journal of Marketing Research, (10), pp. 1-9
26. Klein, B., and K. B. Leffler (1981) “The Role of Market Forces in Assuring Contractual Performance,” Journal of Political Economy, (89), pp. 615-641
27. Klein, S. and R. M., O’Keefe (1999), “The Impact of the Web on Auctions：Some Empirical Evidence and Theoretical Considerations”, International Journal of Electronic Commerce, (3), pp.7-20
28. Krone, K., Jablin F., and L. Putnam (1987), “Communication Theory and Organizational Communication: Multiple Perspectives,” in Handbook of Organizational Communication: An Interdisciplinary Perspective, Newbury Park, CA: Sage Publications, Inc., pp.11-17
29. Kumar, N., Scheer, L., and K. Steenkamp (1995), “The effects of perceived interdependence on dealer attitudes”, Journal of Marketing Research, Chicago: Aug 1995. (32), pp. 348-357
30. Lee, Jonathan, Janghyuk Lee and Lawrence Feick (2001), “The impact of switching costs on the customer satisfaction-loyalty link: mobile phone service in France,” Journal of Services Marketing, (15), pp. 35-48.
31. Lim, K. S. and M. A. Razzaque (1997), “Brand Loyalty and Situational Effects: An Interactionist Perspective,” Journal of International Consumer Marketing, (9), pp. 95-115.
32. Lohtia, R. C. M. Brooks, and R. E. Krapfel (1994), “ What Constitutes a Transaction-Specific Asset? An Examination of the Dimensions and Types.” Journal of Business Research, (30), pp. 261-270
33. McDonald, C. G. (2002), “Reputation in an Internet auction market” Economic Inquiry, Huntington Beach, Oct 2002, (40), pp. 633-651
34. McIntyre, J. M. and M. A. Peck (1998), “Managing and Measuring For Customer Loyalty: A Yin and Yang Perspective,” Direct Marketing, (October), pp. 48-52.
35. McKnight, D. H., and N. L., Chervany (2002), “What Trust Means in E-commerce Customer Relationships: An Interdisciplinary Conceptual Typology”, International Journal of E-Commerce, (6), pp. 35-59.
36. McKnight, D. H., L. L., Cummings, and N. L., Chervany (1998), “Initial trust formation in new organizational relationships,” Academy of Management Review (23:3), 1998, pp. 473-490.
37. Melnik, M. I. (2002),”Does a seller's e-commerce reputation matter? Evidence from Ebay auctions”, The Journal of Industrial Economics, Oxford, Sep 2002, (50), Iss. 3, pp. 337, 13 pgs
38. Milgrom, P. (1989), “Auctions and Bidding: A Primer,” Journal of Economic Perspectives, Summer 1989, pp. 3-22
39. Mohr, J., and J. R., Nevin (1990), “Communication Strategies in Marketing Channels: A Theoretical Perspective,” Journal of Marketing, 1990, pp.36-51
40. Mohr, J. J., R. J Fisher, J. R Nevin,(1996) “Collaborative communication in interfirm relationships: Moderating effects of integration and control,” Journal of Marketing, 1996. (60), Iss. 3, pp. 103
41. Morgan, R. M., and S. D., Hunt (1998), “The commitment-trust theory of relationship marketing,” Journal of Marketing (58), 1994, pp. 20-38.
42. Moorman, C., G., Zaltman, and R. Deshpande (1993), “Factors affecting trust in marketing research relationships,” Journal of Marketing (57), pp. 314-328.
43. Kini, A., and L. Choobineh (1998), “Trust in electronic commerce: definition and theoretical considerations,” IEEE, 1998.
44. Reibstein, D. J. (2002), “What attracts Customers to Online stores, and What Keeps them Coming back?,” Journal of the Academy of Marketing Science, (30), pp. 465-473
45. Reichheld, F. F., R. G. Markey Jr, C. Hopton (2000), “E-customer loyalty - applying the traditional rules of business for online success,” European Business Journal, pp. 173-179.
46. Shamdasani, P. N., and A. A., Balakrishnan (2000) “Determinants of relationship quality and loyalty in personalized services,” Asia Pacific Journal of Management, (7), pp. 399-422.
47. Singh, J., and D. Sirdeshmukh (2000), “Agency and Trust Mechanisms in Relational Exchanges,” Journal of the Academy of Marketing Science, (28), pp. 150-167
48. Sirdeshmukh, D., J., Singh, and B., Sabol (2002), “Consumer Trust, value, and loyalty in Relational Exchanges”, Journal of Marketing, (66), pp.15-37
49. Smith, E. R. (2001), “Seven steps to building e-loyalty,” Medical marketing and Media, Boca Raton, (36), pp. 94-102.
50. Vickery, W.(1961), “Counterspeculation, Auctions, and Competitive Sealed Tenders,” Journal of Finance, March, pp.9-37
51. Williamson, O. E. (1985), The Economic Institutions of Capitalism. New York: The Free Press.
52. Lin, C. D., (2003), “Auction site: A new place to kill time,” Insightxplorer Research Co. http://www.insightxplorer.com/epaper/epaper_200310_3.html