E-Marketing under the Adverse Selection Environment: Model and Case Study

Information asymmetry in e-commerce market causes adverse selection phenomenon that hinders the healthy development of e-marketing. Based on the adverse selection model put forward by American economist George Akerlof , who is one of Nobel Economics Prize laureates in 2001, this paper set up an e-marketing model under the adverse selection environment in e-ecommerce market. This paper takes actual data from Taobao.com in China as samples and demonstratively analyzes the characteristics of adverse selection problems in Chinese e-commerce market. The results showed that reputation mechanism can effectively reduce the appearance of adverse selection, as well as electronic intermediaries and business alliance can offset adverse selection problems. But adverse selection in e-commerce market not only exists but also occurs more serious, which affects the function of e-marketing. Finally, this paper offers some strategic thought and encourages sellers and buyers to trade credibly

How to Counteract Negative Effect of Adverse Selection in Chinese E-Commerce Market? Comparative Analysis on Credit Scoring System and Guarantee System of TAOBAO

E-commerce transactions have a rapid development because of its convenience and flexibility. However, compared to the traditional market, the e-commerce transaction still could not get rid of information asymmetry between the online sellers and online buyers. Adverse selection problems brought by information asymmetry have negative impact on e-marketing and reduce the efficiency of the online transaction. Now some trading online platforms such as TAOBAO (http://www.taobao.com) are seeking ways to reduce adverse selection. Widely used approaches are credit scoring system and guarantee system. This paper takes transaction data from U disk market in TAOBAO as samples and analyzes the role of credit scoring system and guarantee system in Chinese e-commerce market. The results showed that the credit scoring system and guarantee system can effectively counteract negative effect from the adverse selection problems. Although the credit scoring system has a significant impact on transaction volume; guarantee system has greater impact on the trading volume than the credit scoring systems. In addition, relationship between the guarantee system and credit scoring system are not substitutes but complement for each other. In the case of the existence of the guarantee system, online consumers’ purchase for online goods options is still subject to the impact of the credit scoring system. The paper proposes strategy recommendations to improve credit scoring system and guarantee systems to promote the efficiency of online transactions