The Moderating Role of Perceived Regulatory Effectiveness of Online Marketplaces on the Role of Trust and Risk on Transaction Intentions

Past research has widely regarded trust as unconditionally facilitating behavioral intentions, and perceived risk as unconditionally detracting from them. This study advocates the necessity to examine trust and perceived risk within the broader perspective of the societal context. We propose that the perceived regulatory effectiveness of online marketplaces moderates the impact of trust and risk on transaction intentions. First, we hypothesize that the degree to which transaction intentions are affected by their trust in the marketplace, sellers will vary in an inverted-U manner depending on how effective the buyers perceive the online marketplace regulation to be. The impact of trust on transaction intentions will increase as the buyer’s perceived regulatory effectiveness increases from low to medium levels, but it will decrease as the buyer’s perceived effectiveness increases from medium to high levels. Second, the perceived regulatory effectiveness of the online marketplace is hypothesized to reduce the impact of perceived risk on transaction intentions. These moderating effects were examined and empirically supported in the context of eBay’s and Amazon’s online auction marketplaces. Implications for integrating the perceived regulatory effectiveness of online marketplaces into existing trust and risk models are discussed.