Editors' introduction to the issue: Electronic commerce research and applications, volume 9, issue 5, September - October 2010

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Journal Article

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This issue of Electronic Commerce Research and Applications was developed in two parts. It includes a guest-edited Special Section on ‘Competitive Strategy, Economics and Electronic Commerce,’ and several Regular Research Articles that were developed by different members of the journal’s Editorial Board during the past 2 years. The special section was guest-edited by Eric Clemons, Rob Kauffman, Juliana Tsai and Thomas Weber. The articles cover the reliability of software piracy statistics, perceptions of online movie reviews across cultures, the impacts of e-book technology on bookselling competition, and the effects of infrastructure upgrades on mispricing and financial market trading speed.At any given time of the year, ECRA now has on the order of forty articles that are under revision by their authors beyond the first round of review. The Co-Editors of the journal, who act as sponsors of the special issues, encourage promising papers that make contributions of new knowledge, but that do not finish in the timeframe that other Special Issue articles do, to continue on in the review process. This allows them to be published later as Regular Research Articles. There are several articles of this sort in this issue, and we now discuss them.The speed and fidelity of the access of mobile devices to the Internet are limiting factors for the development of mobile commerce. Ushio Sumita and Jinshui Zuo explore these issues with stochastic optimization methods in “Impact of Mobile Access to the Internet on Information Search Completion Time and Customer Conversion.” They focus on thecustomer conversion rate, which describes the actions of customers that engage in some desirable behavior from the part of an Internet-based firm. These behaviors include making a purchase, joining a group-buying Web site, conducting a search in a product aggregator’s Web pages, and so on. The authors further explore the extent to which Internet access speed via a PC-based Internet connection compared to mobile access.The authors’ analysis begins with an assumption that customer conversion requires information search to achieve some cumulative amount of searching so that it is possible to make a decision to take the desired action. They invoke a simplifying procedure that results in the identification of a sequence of information searches from day to day, without consideration for what the extent of PC-based versus mobile device-based search is used. This further enables them to specify a recursive structure for the amount of search activity that is required to achieve a criterion level of information acquisition that sets up a purchase decision. The authors’ analysis delivers its results by characterizing the distribution of search information that can be gathered based on a Laplace transform analysis, which can subsequently be used to derive the distribution of search times that are required before the desired behavior of the customer will be observed.The next article, “An Economic Model of Optimal Fraud Control and the Aftermarket for Security Services in Online Marketplaces,” by Seonyoung Shim and Byungtae Lee, discusses the design and implementation of privacy disclosure rules for application in electronic commerce settings. They focus on the idea of an integrated online marketplace. They emphasize the implementation of security services that permit a market participant to take into account the appropriateness of incentives and then to freely decide how to set their levels of privacy control in synch with the value that they can appropriate from basic protection and additional services. The goal of the authors’ research is to increase the attractiveness of e-market operations by reducing the uncertainty of the participants. Economic theory suggests that this should increase the intrinsic value of market intermediation, and also boost the transactibility of any products and services that are exchanged by traders in an environment made risky by participants who act may be anonymous and opportunistic.The authors apply modeling methods to carry out an analysis that involves honest and opportunistic buyers and sellers, who engage in normal transactions, fraudulent transactions or no transactions at all. Their concerns revolve around their capacity to maximize utility with psychological costs that must be borne in the presence of some level of privacy enforcement by the online marketplace. Meanwhile, the e-market operator will only provide the appropriate security services if it is able to pass on the costs of the services that are demanded. The authors explore how the market operator will determine what incentives to offer so market participants will be self-indemnifying of the risks that they face. Their findings include: how optimal privacy protection changes in the presence of an unintegrated versus an integrated market for transactions and security controls; which structure produces a higher level of protection for a given level of profitability for the market operator; and how privacy controls vary with the profitability of the market operator’s data privacy services.The next article, “Reputation Mechanisms in an Exchange Economy,” contributed to the special issue by Kay-Yut Chen and Tadd Hogg, employs economic theory and analysis with experimental methods. They study how reputation mechanisms affect the aggregate behavior of buyers and sellers in a market in which they have the option of not fulfilling their contracts. They look at how a mechanism of choice leads to varying impacts on market efficiency, equilibrium price, and traded volume. Three questions motivate their experiment design: How does reputation affect the level of fulfillment in a market, where participants endogenously set prices and select their business partners? Does the option to not fulfill contracts change the macroeconomic behavior of the market? How do individuals behave in response to unfulfilled contracts?The authors tested three different mechanisms with varying amounts of information from past transactions. They found that increasing the information from reputation mechanisms led to an increase in the fulfillment rate. Fulfillment rates were approximately the same for endogenous self-reporting of transaction outcomes and exogenous reports. Other findings suggested a positive relationship between fulfillment and marketing efficiency, an inverse relationship between fulfillment and traded volume, and no impact of fulfillment on market price. In addition, the diversity in participant behaviors revealed that people have multiple reactions to reputation, and so there was no consistent pattern in their responses.The modification of digital goods on the Internet is widespread and growing, including music, photographs, audio and video materials, computer games, fashion and style sets, and many other forms of aural and visual presentations. The next article, by Jerald Hughes, discusses “Supplying Web 2.0: An Empirical Investigation of the Drivers of Consumer Transmutation of Digital Information Goods.” The author definestransmutation as involving a “range activities by consumers in the post-purchase environment to manipulate and tinker with content available in digitized form …” The author further describes the activities associated with digital transmutation as: (1) ”extracting, re-ordering and re-bundling snippets of existing content; changing the encoding schemes for digital content in order to improve its usability;” (2) “altering product data or software code in order to change the way a product looks, sounds or functions;” and (3) “using samples of existing works in the creation of new works.”The study involves a survey-based empirical analysis to test a theory of consumer behavior of digital goods transformation that considers consumer heterogeneity in motivation, product involvement, innovativeness and computing ability. The results of the study link computer self-efficacy to continuing involvement, and indicate the role of consumer innovativeness in the transformation of digital goods. The empirical results suggest we should see support for digital transmutation activities embedded in the business models of existing e-commerce and emerging Web 2.0 firms. This will let them make the most innovative uses of new technologies for value co-creation activities that turn their consumers into strongly aligned producers.During the past 20 years, the production of goods and services has been moving from individual firms in isolation to long-term firm alliances and business networks. As a result, the process of procurement is being transformed, from one-off purchasing events to combinatorial auctions, and to multidimensional procurement auctions that permit the participation of multiple firms in a business network. Benjamin Blau, Tobias Conte and Clemens van Dinther contributed an article entitled “A Multidimensional Procurement Auction for Trading Composite Services.” It emphasizes the procurement of distributed services. It proposes the idea of service value networks.The authors model the degree of interaction among single and multiple providers and thedegree of service composition complexity based on whether a single or a complex set of multiple services is demanded. Their work focuses on complex offerings of services in online markets. The problem they treat with their mechanism design is how to maximize utility across all of the participants in the selected service composition for the buyer. They also consider how to solve the winner determination problem, so that a feasible polynomial time solution is possible. They also discuss how to support the value-maximizing behavior of service providers. For example, the auction mechanism that they propose is incentive-compatible: it supports the revelation of the true quality and value of the services that are offered by auction participants. The authors also offer guidance on how service providers should decide whether to offer bundled or unbundled service offerings, based on their position in the service value network and the nature of service demand.We thank the current Special Section Editors, the past Special Issue Editors Claudia Loebbecke, Bin Wang, Chuck Wood, and Roumen Vragov, the Area Editors, and the participating reviewers who helped to develop the research articles in this issue. We acknowledge the journal’s publisher, Rebecca Wilson, for her stewardship of the journal, and support of the editorial team.


Computer Sciences

Research Areas

Information Systems and Management


Electronic Commerce Research and Applications





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