A Study on Effectiveness of Third-party Seals in Online Transaction Markets from the Perspective of Signaling Theory

Abstract

Abstract:

This paper studies the effectiveness of third -party seals in online transaction markets from the perspective of hybrid equilibrium in the framework of signaling theory. Firstly, we find that effects of third-party seals are improved with increased sealing costs or shrinking difference of consumer's willingness-to-pay toward different types of sellers in the case of bilateral monopoly market. However, consumer's confidence has an ambiguous influence on third-party seals. Secondly, the effectiveness of third-party seals are negatively related to sealing costs in competitive markets. Seals with low costs have better effects compared with those with high costs. Thirdly, influences from sealing costs on their effectiveness have a trend of self-enhancing, which means that effects of low-cost seals are further improved while those of high-cost seals are further worsened with increased competition in markets.

Key words: third-party seals, sealing cost, signaling, market structure

Wang Yu, Wei Shouhua. A Study on Effectiveness of Third-party Seals in Online Transaction Markets from the Perspective of Signaling Theory[J]. , 2016, 28(9): 51-60.

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