This paper aims to predict consumer acceptance of e-commerce by proposing a set of key drivers for engaging consumers in on-line transactions. The primary constructs for capturing consumer acceptance of e-commerce are intention to transact and on-line transaction behavior. Following the theory of reasoned action (TRA) as applied to a technology-driven environment, technology acceptance model (TAM) variables (perceived usefulness and ease of use) are posited as key drivers of e-commerce acceptance. The practical utility of TAM stems from the fact that e-commerce is technology-driven. The proposed model integrates trust and perceived risk, which are incorporated given the implicit uncertainty of the e-commerce environment. The proposed integration of the hypothesized independent variables is justified by placing all the variables under the nomological TRA structure and proposing their interrelationships. The resulting research model is tested using data from two empirical studies. The first, exploratory study comprises three experiential scenarios with 103 students. The second, confirmatory study uses a sample of 155 on-line consumers. Both studies strongly support the e-commerce acceptance model by validating the proposed hypotheses. The paper discusses the implications for e-commerce theory, research, and practice, and makes several suggestions for future research.

Consumer Acceptance of Electronic Commerce: Integrating Trust and Risk with the Technology Acceptance Model

There have been many claims that the Internet represents a new nearly "frictionless market." Our research empirically analyzes the characteristics of the Internet as a channel for two categories of homogeneous products-books and CDs. Using a data set of over 8,500 price observations collected over a period of 15 months, we compare pricing behavior at 41 Internet and conventional retail outlets.

We find that prices on the Internet are 9-16% lower than prices in conventional outlets, depending on whether taxes, shipping, and shopping costs are included in the price. Additionally, we find that Internet retailers' price adjustments over time are up to 100 times smaller than conventional retailers' price adjustments-presumably reflecting lower menu costs in Internet channels. We also find that levels of price dispersion depend importantly on the measures employed. When we compare the prices posted by different Internet retailers we find substantial dispersion. Internet retailer prices differ by an average of 33% for books and 25% for CDs. However, when we weight these prices by proxies for market share, we find dispersion is lower in Internet channels than in conventional channels, reflecting the dominance of certain heavily branded retailers.

We conclude that while there is lower friction in many dimensions of Internet competition, branding, awareness, and trust remain important sources of heterogeneity among Internet retailers.

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Frictionless Commerce? A Comparison of Internet and Conventional Retailers

Institution-based trust is a buyer's perception that effective third-party institutional mechanisms are in place to facilitate transaction success. This paper integrates sociological and economic theories about institution-based trust to propose that the perceived effectiveness of three IT-enabled institutional mechanisms-specifically feedback mechanisms, third-party escrow services, and credit card guarantees-engender buyer trust in the community of online auction sellers. Trust in the marketplace intermediary that provides the overarching institutional context also builds buyer's trust in the community of sellers. In addition, buyers' trust in the community of sellers (as a group) facilitates online transactions by reducing perceived risk. Data collected from 274 buyers in Amazon's online auction marketplace provide support for the proposed structural model. Longitudinal data collected a year later show that transaction intentions are correlated with actual and self-reported buyer behavior. The study shows that the perceived effectiveness of institutional mechanisms encompasses both "weak" (market-driven) and "strong" (legally binding) mechanisms. These mechanisms engender trust, not only in a few reputable sellers, but also in the entire community of sellers, which contributes to an effective online marketplace. The results thus help explain why, despite the inherent uncertainty that arises when buyers and sellers are separated in time and in space, online marketplaces are proliferating. Implications for theory are discussed, and suggestions for future research on improving IT-enabled trust-building mechanisms are suggested.

Building Effective Online Marketplaces with Institution-Based Trust.

https://aisel.aisnet.org/cgi/viewcontent.cgi?article=1155&context=icis2002

Building Effective Online Marketplaces with Institution-Based Trust

Despite the wide use of reputational mechanisms such as eBay's Feedback Forum to promote trust, empirical studies have shown conflicting results as to whether online feedback mechanisms induce trust and lead to higher auction prices. This study examines the extent to which trust can be induced by proper feedback mechanisms in electronic markets, and how some risk factors play a role in trust formation. Drawing from economic, sociological, and marketing theories and using data from both an online experiment and an online auction market, we demonstrate that appropriate feedback mechanisms can induce calculus-based credibility trust without repeated interactions between two transacting parties. Trust can mitigate information asymmetry by reducing transaction-specific risks, therefore generating price premiums for reputable sellers. In addition, the research also examines the role that trust plays in mitigating the risks inherent in transactions that involve very expensive products.

Evidence of the effect of trust building technology in electronic markets: price premiums and buyer behavior

The efficiency of electronic means for commerce is sometimes countered by increased product cost, as demonstrated in this case involving an auction system for used cars in Japan. E lectronic marketplaces have become increasingly popular alternatives to traditional forms of commerce [8, 9]. This increase in popularity has led many to predict that one effect will be to lower the market price of goods. This reduced price hypothesis was proposed by Bakos in his seminal article on electronic marketplaces [2]. Buyers in market-inter-mediated transactions have to bear search costs to obtain information about the prices and product offerings of sellers. High search costs of buyers enable sellers to maintain prices substantially above their marginal costs and result in alloca-tional inefficiencies in market transactions. Electronic market systems can reduce the search costs that buyers must incur to acquire information about seller prices and product offerings, thus enabling buyers to locate suppliers that better match their needs. The lowered search costs allow buyers to look at more product offerings and make it difficult for sellers to sustain high prices. The reduced price hypothesis predicts that buyers will enjoy lower product prices as a result of the increased competition among sellers in electronic marketplaces. An industry case study is presented in this article to demonstrate that the prices of goods traded through electronic marketplaces can actually be higher than those of products sold in traditional markets. AUCNET is an electronic marketplace introduced to reduce search costs of buyers for used-car transactions in Japan. The average contract price of secondhand cars sold through AUCNET is much higher than that of traditional, non-electronic markets. The industry case study suggests that the analysis of electronic market impacts on product prices should take into account economic factors beyond the buyers' search costs. This article investigates why the product prices in AUCNET are higher than those of traditional markets by examining other economic variables than the buyer's search costs.

Ho-Guen Lee

Papers

Do electronic marketplaces lower the price of goods