Advertisement

Asymmetric Information in High-Value Low-Frequency Transactions: Mitigation in Real Estate Using Blockchain

  • Mark Hoksbergen
  • Johnny Chan
  • Gabrielle Peko
  • David SundaramEmail author
Conference paper
Part of the Communications in Computer and Information Science book series (CCIS, volume 1113)

Abstract

The saying ‘buyer be aware’ has been used as an excuse from a seller’s perspective to withhold information that could negatively impact a transaction. This asymmetric information is especially prevalent in high–value, low-frequency assets. Using New Zealand real estate as an exemplar to understand the difficulties faced in such a transaction, we delve into the characteristics of the transaction and specifically the asymmetric information that is predominant in the real estate industry. Understanding the processes and stakeholders involved gives us the possibility to introduce blockchain as a system to mitigate asymmetric information. We identify the bottlenecks in the current processes and suggest possible solutions that capitalize on the blockchain characteristics.

Keywords

Transaction Information asymmetry Blockchain New Zealand real estate Information value chain 

References

  1. 1.
    Lillrank, P.: The quality of information. Int. J. Qual. Reliab. Manag. 20, 691–703 (2003)CrossRefGoogle Scholar
  2. 2.
    Allmon, D.E., Grant, J.: Real estate sales agents and the code of ethics: a voice stress analysis. J. Bus. Ethics 9, 807–812 (1990).  https://doi.org/10.1007/BF00383279CrossRefGoogle Scholar
  3. 3.
    Williamson, O.E.: Chapter 3 transaction cost economics (1989). https://linkinghub.elsevier.com/retrieve/pii/S1573448X8901006XCrossRefGoogle Scholar
  4. 4.
    BusinessDictionary.com: What is a market? Definition and meaning. http://www.businessdictionary.com/definition/transaction.html
  5. 5.
    NZ Government Justice: Businesses trading in high value goods and AML/CFT. New Zealand Ministry of Justice. https://www.justice.govt.nz/justice-sector-policy/key-initiatives/aml-cft/info-for-businesses/high-value-goods/#why
  6. 6.
    Frederiks, E.R., Stenner, K., Hobman, E.V.: Household energy use: applying behavioural economics to understand consumer decision-making and behaviour. Renew. Sustain. Energy Rev. 41, 1385–1394 (2015).  https://doi.org/10.1016/J.RSER.2014.09.026CrossRefGoogle Scholar
  7. 7.
    North, D.C.: The new institutional economics (1986)Google Scholar
  8. 8.
    Ellison, G., Ellison, S.F.: Search, Obfuscation, and Price Elasticities on the Internet. Econometrica. 77, 427–452 (2004).  https://doi.org/10.2139/ssrn.564742CrossRefzbMATHGoogle Scholar
  9. 9.
    Kim, D.J., Ferrin, D.L., Rao, H.R.: A trust-based consumer decision-making model in electronic commerce: the role of trust, perceived risk, and their antecedents. Decis. Support Syst. 44, 544–564 (2008).  https://doi.org/10.1016/J.DSS.2007.07.001CrossRefGoogle Scholar
  10. 10.
    Argyris, C., Schon, D.A.: Theory in Practice: Increasing Professional Effectiveness. Jossey-Bass, Oxford (1974)Google Scholar
  11. 11.
    Maltz, E.: Is all communication created equal? An investigation into the effects of communication mode on perceived information quality. J. Prod. Innov. Manag. 17, 110–127 (2000).  https://doi.org/10.1111/1540-5885.1720110CrossRefGoogle Scholar
  12. 12.
    Neelawala, S.: Asymmetric information between buyers and sellers in the residential property market: a hedonic property valuation approach (2014)Google Scholar
  13. 13.
    Hendel, I., Lizzeri, A.: Adverse selection in durable goods markets. American Economic Association (1999)Google Scholar
  14. 14.
    Akerlof, G.A.: The market for “Lemons”: quality uncertainty and the market mechanism. Q. J. Econ. 84, 488–500 (1970). Oxford University Press StableCrossRefGoogle Scholar
  15. 15.
    Seidmann, A., Sundararajan, A.: The effects of task and information asymmetry on business process redesign. Int. J. Prod. Econ. 50, 117–128 (1997).  https://doi.org/10.1016/s0925-5273(97)00037-6CrossRefGoogle Scholar
  16. 16.
    Rosen, S.: Hedonic prices and implicit markets: product differentiation in pure competition. J. Polit. Econ. 82(1), 34–55 (1974)CrossRefGoogle Scholar
  17. 17.
    Pope, J.C.: Buyer information and the hedonic: the impact of a seller disclosure on the implicit price for airport noise. J. Urban Econ. 63, 498–516 (2008).  https://doi.org/10.1016/J.JUE.2007.03.003CrossRefGoogle Scholar
  18. 18.
    Easley, D., Hvidkjaer, S., O’hara, M.: Is information risk a determinant of asset returns? American Finance Association (2002)Google Scholar
  19. 19.
    Shanon, C.E., Weaver, W.: The Mathematical Theory of Communication. University of Illinois Press, Champaign (1949)Google Scholar
  20. 20.
    Ackoff, R.L.: From data to wisdom. J. Appl. Syst. Anal. 16, 3–9 (1989). citeulike-article-id:6930744Google Scholar
  21. 21.
    Cleveland, H.: Information as a resource. Futurist. 16, 34–39 (1982)Google Scholar
  22. 22.
    Tuomi, I.: Data is more than knowledge: implications of the reversed knowledge hierarchy for knowledge. Manag. Inf. Syst. 16, 107–121 (1999).  https://doi.org/10.1109/HICSS.1999.772795CrossRefGoogle Scholar
  23. 23.
    Carpenter, S., Cannady, J.: Tool for sharing and assessing models of fusion-based space transportation systems. In: 40th AIAA/ASME/SAE/ASEE Joint Propulsion Conference and Exhibit. American Institute of Aeronautics and Astronautics, Reston (2004)Google Scholar
  24. 24.
    Sarah Fraser: News, views and challenges from Sarah Fraser: model 4: data, information, knowledge, wisdom, http://spreadgoodpractice.blogspot.com/2010/12/model-4-data-information-knowledge.html
  25. 25.
    Harlow, H.: The effect of tacit knowledge on firm performance. J. Knowl. Manag. 12, 148–163 (2008).  https://doi.org/10.1108/13673270810852458CrossRefGoogle Scholar
  26. 26.
    Jullien, B., Mariotti, T.: Auction and the informed seller problem. Games Econ. Behav. 56, 225–258 (2006).  https://doi.org/10.1016/j.geb.2005.08.008MathSciNetCrossRefzbMATHGoogle Scholar
  27. 27.
    Dreyfus, H.L., Dreyfus, S.E., Koschmann, T.D.: Book Review Five Stages in the Acquisition of Expertise. Basil Blackweli, Oxford (1986)Google Scholar
  28. 28.
    Spender, J.-C.: Making knowledge the basis of a dynamic theory of the firm. Strat. Manag. J. 17, 45–62 (1996)CrossRefGoogle Scholar
  29. 29.
    Lakshman, C.: Organizational knowledge leadership: a grounded theory approach. Leadersh. Organ. Dev. J. 28, 51–75 (2007).  https://doi.org/10.1108/01437730710718245CrossRefGoogle Scholar
  30. 30.
    Takeuchi, H., Nonaka, I.: Theory of organizational knowledge creation. In: Morey, D., Maybury, M., Thuraisingham, B. (eds.) Knowledge Management: Classic and Contemporary Works, pp. 139–182. MIT Press, Cambridge (2002)Google Scholar
  31. 31.
    Goh, S.C.: Managing effective knowledge transfer: an integrative framework and some practice implications. J. Knowl. Manag. 6, 23–30 (2002).  https://doi.org/10.1108/13673270210417664CrossRefGoogle Scholar
  32. 32.
    Teece, D.J.: Capturing value from knowledge assets: the new economy, markets for know-how, and intangible assets. Calif. Manag. Rev. 40, 55–79 (2012).  https://doi.org/10.2307/41165943CrossRefGoogle Scholar
  33. 33.
    Chua, A.: Knowledge sharing: a game people play. Aslib Proc. 55, 117–129 (2003).  https://doi.org/10.1108/00012530310472615CrossRefGoogle Scholar
  34. 34.
    Bamberg, G., et al.: Agency Theory, Information, and Incentives. Springer, Heidelberg (2011).  https://doi.org/10.1007/978-3-642-75060-1CrossRefGoogle Scholar
  35. 35.
    Nakamoto, S.: Bitcoin: a peer-to-peer electronic cash system. Satoshi Nakamoto Institute. www.cryptovest.co.uk
  36. 36.
    Hansen, M.D., Kokal, M.: The coming blockchain disruption: trust without the “middle-man” (2017)Google Scholar
  37. 37.
    Swan, M.: Blockchain: Blueprint for A New Economy. O’Reilly Media Inc., Sebastopol (2015)Google Scholar
  38. 38.
    Zhao, J.L., Fan, S., Yan, J.: Overview of business innovations and research opportunities in blockchain and introduction to the special issue. Financ. Innov. 2, 28 (2016).  https://doi.org/10.1186/s40854-016-0049-2CrossRefGoogle Scholar
  39. 39.
    Sultan, K., Ruhi, U., Lakhani, R.: Conceptualizing blockchains: characteristics & applications. In: 11th IADIS International Conference Information Systems, p. 57 (2018)Google Scholar

Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  • Mark Hoksbergen
    • 1
  • Johnny Chan
    • 1
  • Gabrielle Peko
    • 1
  • David Sundaram
    • 1
    Email author
  1. 1.Department of Information Systems and Operations ManagementUniversity of AucklandAucklandNew Zealand

Personalised recommendations