Software piracy: an analysis of protection strategies
Management Science
Making Markets: how firms can design and profit from online auctions and exchanges
Making Markets: how firms can design and profit from online auctions and exchanges
Frictionless Commerce? A Comparison of Internet and Conventional Retailers
Management Science
Privacy in electronic commerce and the economics of immediate gratification
EC '04 Proceedings of the 5th ACM conference on Electronic commerce
Information Systems Research
Preventive and deterrent controls for software piracy
Journal of Management Information Systems
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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.