یک مدل اقتصادی از کنترل کلاهبرداری بهینه و موجود در بازار برای خدمات امنیتی در بازارهای آنلاین

The anonymity of online markets allows traders to easily behave opportunistically. Online marketplaces can lower the uncertainty of participants’ identities by adopting preventative controls such as privacy disclosure rules. However, the use of severe privacy controls to engender risk-free environments might sacrifice not only the size of transactions in the marketplace but also the demand for optional security services like escrow services, which constitute a very sizable revenue source for the marketplace services provider. In this vein, we investigate the probability that an integrated online marketplace (IOM) with security services strategically adjusts privacy controls to incentivize traders to self-select both basic transactions and optional security services. Our results show that an integrated marketplace increases the probability of allowing more fraud than is socially optimal by lowering privacy controls. Market risk can be viewed as an asset for an integrated marketplace rather than a liability that inflicts transaction costs on worried traders. Our study argues that marketplaces may differ in terms of their fraud control from what is socially optimal, according to their revenue structures so that the control of online fraud needs to be regulated from the social perspective. However, under certain conditions, integration of this aftermarket will not harm traders or the social welfare.

Creating markets is a mainstay of dotcom business models (Kambil and Heck 2002). While the extensive listings of tradable goods and powerful search technologies make online markets liquid,1 the electronic media connecting trading participants and sharing quality information remains lean. With direct trades between unknown customers over great distances, online transactions are vulnerable to many types of fraudulent conduct.2 The main reason that the online marketplace easily attracts fraud originates from a unique characteristic of Internet transactions. Under considerable information asymmetry – the uncertainty of trader identity and the uncertainty of merchandise quality – online trade allows sellers or buers to easily engage in opportunistic behavior ( Klein and Leffler 1981). One way to directly resolve fraudulent actions in anonymous markets is lowering the uncertainty of identity through disclosure of private information, which makes individuals identifiable (Culnan and Armstrong 1999). The anonymity of the Internet is a double-edged sword, however. Honest traders may prefer this characteristic for the protection of their privacy, while opportunistic people take advantage of it to commit fraud. If the practices of an online business raise privacy concerns resulting in a perception that customers must reveal too much personal information or that the information may be used unfairly, customers unwilling to disclose additional personal information may spread bad word-of-mouth (Culnan and Armstrong 1999). The result may be that businesses will have difficulty attracting new customers, which can negatively impact the bottom line. Online marketplaces need to do a very tricky balancing act, mitigating the opportunity costs of electronic transactions that result from anonymity while protecting the privacy of the majority of their customers. This issue presents possible conflict between strict security control and infringement of consumer privacy, as discussed by prior studies (Culnan and Armstrong 1999, Rowland 2000). However, we go further by identifying the business value of security services (e.g., escrow services) for online marketplaces and explore the possibility that market risk is intentionally under-controlled and strategically utilized according to the revenue structure. We pay attention to the fact that security services that insure traders against transaction risk may not only be good ex post measures against the risk of online fraud but also a very sizable revenue source for online marketplaces. For example, eBay integrated both trading and escrow services when it took over PayPal in July 2002 and eBay’s recent good business performance is largely attributed to PayPal ( Cullen 2007). 3 Note that imposition of excessively austere privacy controls not only incites online users’ privacy concerns but also gives them less incentive to adopt security services due to reduced market risk ( Antony et al. 2006, Zhang et al. 2007). However, loosely controlled market risk brings about more opportunity for online fraud. Therefore, when an online marketplace provides in-house security services along with basic transaction services, its decision on the preventative privacy controls is complicated by the issues of privacy concern and the promotion of security services. We are primarily concerned with how the integration of transaction and security services distorts online market decisions on privacy controls from social optimality. In other words, this study examines the conditions under which the provision of security services should be integrated with an online marketplace or independently managed by third parties. Given that online commerce is claiming a rapidly growing share of worldwide business, and customers have concerns about security and privacy, we believe that this is a very pressing research question.

The characteristics of online transactions – anonymity, low transaction cost, and the difficulties in detection – stimulate online fraud. In order to cope with the risk of anonymity in online transactions, markets can adopt privacy controls that require a certain level of identity disclosure. However, a complicated issue is created by combining online traders’ privacy concerns and the business value of security services. Hence, online marketplaces need to achieve a balancing act in handling this issue. Identifying the substitutability between the level of privacy control and security service adoption, our study shows that an IOM can utilize privacy controls as an incentive scheme to make traders self-select its basic and optional services. eBay’s integration with PayPal may promote fraudulent transactions beyond the socially optimal level, while it does not always reduce social welfare. On the other hand, the decision of a UOM also deviates from social optimality, ignoring the business value of risk-relief services. In this vein, our results argue that the enforcement of preventative control should balance management of market risk and consumer privacy. In addition to such managerial implications, there are some theoretical contributions of this study. First, we identify the unique feature of preventative privacy controls as an efficient measure to optimally adjust the sales of primary and secondary services in the online marketplace. The studies on warranties have focused on the tradeoff between sales of basic products and optional warranties (Mussa and Rosen 1978, Padmanabhan and Rao 1993). However, our study demonstrates a new aspect of the warranty business, identifying a very direct measure related to the risk control involved in transactions. Second, so far, information asymmetry has been noted as a source of transaction risk, and is controlled in prior studies (Stiglitz and Weiss 1981, Kreps et al. 1982, Lynch et al. 1986, Hu et al. 2004). However, we highlight the business opportunity that originates from information asymmetry. While anonymity in online markets intensifies the problem of information asymmetry, simultaneously, such environments also may give online businesses a variety of opportunities for selling risk-relief services, which is a new perspective on information asymmetry. As pointed out in this study, the issue is to properly regulate the utilization of this opportunity for social optimality. There are several limitations in our simplified model in addition to assumptions we made for simplicity of analysis. We do not consider additional costs to traders when security services are provided by a third party. Technically, harnessing security and transaction services may not be difficult with the emergence of a more interoperable web. However, users may incur additional costs resulting from discrepancies in trust between two online businesses. In addition, we do not consider price competition or any strategic moves by independent security service firms. These are areas for further extension of this study.