Abstract
Markets in which similar goods of different qualities are sold suffer from information asymmetries and their negative consequences. Dealers have established themselves, and mediate these markets through their use of quality signals. While these signals help to mitigate information asymmetries, these markets still function well below their optimum: a large share of goods sold are overpriced, and most of the benefits are reaped by intermediaries. In this paper we build on prior research that proposes the use of blockchain as an enabler for trusted, decentralized asset documentation. Applying a socio-technical lens, we describe how blockchain-enabled multi-party certification affords dealers the action potential to send signals that are more closely correlated to the unobservable quality of the underlying good (i.e., signals with a higher fit) than the signals they send today. We then both theorize and experimentally explore the market effects of the two types of signals. Using data from a laboratory market experiment with 210 participants, we find empirical evidence that multi-party certification affords dealers the action potential to send signals of significantly higher fit than those sent by intermediaries alone, leading to a reduction in information asymmetries, a more efficient allocation of goods, and an increase in market fairness.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 395-425 |
| Number of pages | 31 |
| Journal | Journal of Management Information Systems |
| Volume | 39 |
| Issue number | 2 |
| DOIs | |
| State | Published - 2022 |
Funding
This research study was performed in the context of the Cardossier project, an industry research project funded by a Swiss government agency (Innosuisse). Cardossier is a collaborative effort of multiple partners from the automotive sector in Switzerland. We thank all Cardossier project members for their feedback and involvement during the design of our market game. Especially, we would like to thank AutoScout24 (one of Europe’s largest online platform providers for used-cars) for the right to use its layouts, and for access to data and expert car evaluations and its participation in and feedback on the pretests. We would also like to thank Auto-I dat (a leading supplier of car evaluations and studies) for its expert valuation of the used cars that were used during our experiment as well as for its participation in and feedback during the pretests. Last but not least, we would also like to thank AMAG, one of the largest car importers and retailers in Switzerland, for providing a standard assessment table that we used for car evaluation as, well as for valuable feedback on and input to the pretests.
Keywords
- Blockchain
- information asymmetry
- market for lemons
- market mechanism
- multi-party certification
- online signaling
- quality certification
ASJC Scopus subject areas
- Management Information Systems
- Computer Science Applications
- Management Science and Operations Research
- Information Systems and Management