Skip to main content
SpringerLink
Log in

How can we reduce information asymmetries and enhance trust in ‘The Market for Lemons’?

  • Original Article
  • Published:
Information Systems and e-Business Management Aims and scope Submit manuscript

Abstract

The used car market is characterized by information asymmetries and mistrust. Blockchain technology promises to resolve these problems using a system which stores data over the life cycle of a vehicle. However, while blockchain technology is strong in preserving the stored information, sense-making of this information is still essential to bring value to end consumers of the system. In this paper, we take an exploratory approach and create a prototype, which is then evaluated in realistic car sale conversations between buyers and sellers. We demonstrate and discuss how the interplay of different design elements of an application, built on top of a blockchain-based platform, helps to reduce information asymmetries and enhance trust. Our findings suggest that though providing more information about a used product (a car) leads to fewer information asymmetries in general, a reputation mechanism and data analysis are both beneficial in improving the situation further. As for trust, such a system enhances trust between buyers and sellers and, in general, makes the overall purchase process more trustworthy. However, to achieve these positive effects, the quality of the stored information should be guaranteed and properly communicated to the end-user.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Fig. 7
Fig. 8
Fig. 9
Fig. 10
Fig. 11

Similar content being viewed by others

Notes

  1. In March 2019, a non-profit association was founded to prepare market entry and expand the ecosystem. Ten new organizations joined the project by July 2019.

  2. A vehicle identification number (VIN) is a unique code, including a serial number, used by the automotive industry to identify individual motor vehicles, towed vehicles, motorcycles, scooters and mopeds.

  3. https://docs.google.com/spreadsheets/d/1Lh0AQ53aWcI4cxC93zBdfAgCN6UNxasmj-mjOunwpyg/ .

References

  • Akerlof GA (1970) The Market for ‘Lemons’: quality uncertainty and the market mechanism. Q J Econ 84:488–500. https://www.jstor.org/stable/1879431

    Article  Google Scholar 

  • Ba S, Pavlou PA (2002) Evidence of the effect of trust building technology in electronic markets: price premiums and buyer behavior. MIS Q 26:243–268. https://www.jstor.org/stable/4132332

    Article  Google Scholar 

  • Bauer I, Zavolokina L, Leisibach F, Schwabe G (2019a) Exploring blockchain value creation: the case of the car ecosystem. In: 52nd Hawaii international conference on system sciences

  • Bauer I, Zavolokina L, Schwabe G (2019b) Is there a market for trusted car data? Electron Mark. https://doi.org/10.1007/s12525-019-00368-5

    Article  Google Scholar 

  • Brousmiche KL, Heno T, Poulain C, Dalmieres A, Hamida EB (2018) Digitizing, securing and sharing vehicles life-cycle over a consortium blockchain: lessons learned. In: 2018 9th IFIP international conference on new technologies, mobility and security (NTMS). IEEE, pp 1–5

  • Fleischmann M, Ivens B (2019) Exploring the role of trust in blockchain adoption: an inductive approach. In: Proceedings of the 52nd Hawaii international conference on system sciences

  • Fuller MA, Serva MA, Benamati JS (2007) Seeing is believing: the transitory influence of reputation information on e-commerce trust and decision making. Decis Sci 38(4):675–699

    Article  Google Scholar 

  • Granados NF, Gupta A, Kauffman RJ (2006) The impact of IT on market information and transparency: a unified theoretical framework. J Assoc Inf Syst 7(3):7

    Google Scholar 

  • Granados N, Gupta A, Kauffman RJ (2008) Designing online selling mechanisms: transparency levels and prices. Decis Support Syst 45(4):729–745

    Article  Google Scholar 

  • Gregor S, Hevner AR (2013) Positioning and presenting design science research for maximum impact. MIS Q 37(2):337–355. https://doi.org/10.2753/MIS0742-1222240302

    Article  Google Scholar 

  • Hevner AR, March ST, Park J, Ram S (2004) Design science in information systems research. MIS Q 28(1):75–105. https://doi.org/10.2307/25148625

    Article  Google Scholar 

  • Jøsang A, Ismail R, Boyd C (2007) A survey of trust and reputation systems for online service provision. Decis Support Syst 43(2):618–644

    Article  Google Scholar 

  • Kokkodis M, Ipeirotis PG (2015) Reputation Transferability in Online Labor Markets. Manag Sci 62(6):1687–1706

    Article  Google Scholar 

  • Levy Y, Ellis TJ (2006) A systems approach to conduct an effective literature review in support of information systems research. Inf Sci 9:10

    Google Scholar 

  • March ST, Smith GF (1995) Design and natural science research on information technology. Decis Support Syst 15(4):251–266

    Article  Google Scholar 

  • Mayer RC, Davis JH, Schoorman FD (1995) An integrative model of organizational trust. Acad Manag Rev 20(3):709–734

    Article  Google Scholar 

  • McKnight DH, Chervany NL (1996) The meanings of trust. University of Minnesota, Minneapolis

    Google Scholar 

  • Miscione G, Ziolkowski R, Zavolokina L, Schwabe G (2018) Tribal governance: the business of blockchain authentication. In: Prepared for the Hawaii international conference on system sciences (HICSS)

  • Mishra DP, Heide JB, Cort SG (1998) Information asymmetry and levels of agency relationships. J Mark Res 35:277–295. https://www.jstor.org/stable/3152028

    Article  Google Scholar 

  • Notheisen B, Cholewa JB, Shanmugam AP (2017) Trading real-world assets on blockchain. Bus Inf Syst Eng 59(6):425–440

    Article  Google Scholar 

  • Nunamaker JF, Briggs RO, Derrick DC, Schwabe G (2015) The last research mile: achieving both rigor and relevance in information systems research. J Manag Inf Syst 32(3):10–47. https://doi.org/10.1080/07421222.2015.1094961

    Article  Google Scholar 

  • Peffers K, Tuunanen T, Rothenberger MA, Chatterjee S (2007) A design science research methodology for information systems research. J Manag Inf Syst 24(3):45–77

    Article  Google Scholar 

  • Pries-Heje J, Baskerville R, Venable JR (2008) Strategies for design science research evaluation. In: ECIS, pp 255–266

  • Resnick P, Kuwabara K, Zeckhauser R, Friedman E (2000) Reputation systems. Commun ACM 43(12):45–48

    Article  Google Scholar 

  • Rezabakhsh B, Bornemann D, Hansen U, Schrader U (2006) Consumer power: a comparison of the old economy and the internet economy. J Consum Policy 29(1):3–36

    Article  Google Scholar 

  • Riege C, Saat J, Bucher T (2009) Systematisierung von Evaluationsmethoden in Der Gestaltungsorientierten Wirtschaftsinformatik. In: Wissenschaftstheorie Und Gestaltungsorientierte Wirtschaftsinformatik. Springer, pp 69–86. http://link.springer.com/chapter/10.1007/978-3-7908-2336-3_4

  • Seebacher S, Schüritz R (2017) Blockchain technology as an enabler of service systems: a structured literature review. In: International conference on exploring services science. Springer, pp 12–23. http://link.springer.com/chapter/10.1007/978-3-319-56925-3_2

  • Söllner M (2014) Deriving trust supporting components for ubiquitous information systems, vol 1. Kassel University Press GmbH, Kassel

    Google Scholar 

  • Söllner M, Leimeister JM (2013) What we really know about antecedents of trust: a critical review of the empirical information systems literature on trust. Psychology of Trust: New Research, D. Gefen. Nova Science Publishers, Verlag. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2475385

  • Söllner M, Hoffmann A, Hoffmann H, Wacker A, Leimeister JM (2012) Understanding the formation of trust in IT artifacts. In: International conference on information systems, association for information systems. https://aisel.aisnet.org/icis2012/proceedings/HumanBehavior/11/

  • Swan JE, Nolan JJ (1985) Gaining customer trust: a conceptual guide for the salesperson. J Pers Sell Sales Manag 5(2):39–48

    Google Scholar 

  • Venable J, Pries-Heje J, Baskerville R (2012) A comprehensive framework for evaluation in design science research. In: International conference on design science research in information systems. Springer, pp 423–438

  • Wengraf T (2001) Qualitative research interviewing: biographic narrative and semi-structured methods. Sage, Thousand Oaks

    Book  Google Scholar 

  • Zavolokina L, Miscione G, Schwabe G (2019a) Buyers of lemons: addressing buyers’ needs in the market for lemons with blockchain technology. In: 52nd Hawaii international conference on system sciences

  • Zavolokina L, Ziolkowski R, Bauer I, Schwabe G (2019b) Management, governance and value creation in a blockchain consortium. MISQE. https://www.zora.uzh.ch/id/eprint/178630/

  • Ziolkowski R, Parangi G, Miscione G, Schwabe G (2019) Examining gentle rivalry: decision-making in blockchain systems. In: HICSS 2019 Proceedings, Maui, Hawaii, USA, January 8. http://hdl.handle.net/10125/59891

Download references

Funding

This study was funded by Innosuisse.

Author information

Authors and Affiliations

  1. University of Zurich, Binzmuehlestrasse 14, 8050, Zurich, Switzerland

    Liudmila Zavolokina, Manuel Schlegel & Gerhard Schwabe

Authors
  1. Liudmila Zavolokina
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Manuel Schlegel
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Gerhard Schwabe
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Liudmila Zavolokina.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Zavolokina, L., Schlegel, M. & Schwabe, G. How can we reduce information asymmetries and enhance trust in ‘The Market for Lemons’?. Inf Syst E-Bus Manage 19, 883–908 (2021). https://doi.org/10.1007/s10257-020-00466-4

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10257-020-00466-4

Keywords

Search

Navigation