3 4 5 on Product Uncertainty in Online Markets : 6 Theory and Evidence 1

Online markets pose a difficulty for evaluating products, particularly experience goods, such as used cars, that 11 cannot be easily described online. This exacerbates product uncertainty, the buyer’s difficulty in evaluating 12 product characteristics, and predicting how a product will perform in the future. However, the IS literature 13 has focused on seller uncertainty and ignored product uncertainty. To address this void, this study 14 conceptualizes product uncertainty and examines its effects and antecedents in online markets for used cars 15 (eBay Motors). 16 17 Extending the information asymmetry literature from the seller to the product, we first theorize the nature and 18 dimensions (description and performance) of product uncertainty. Second, we propose product uncertainty 19 to be distinct from, yet shaped by, seller uncertainty. Third, we conjecture product uncertainty to negatively 20 affect price premiums in online markets beyond seller uncertainty. Fourth, based on the information signaling 21 literature, we describe how information signals (diagnostic product descriptions and third-party product 22 assurances) reduce product uncertainty. 23 24 The structural model is validated by a unique dataset comprised of secondary transaction data from used cars 25 on eBay Motors matched with primary data from 331 buyers who bid on these used cars. The results distin26 guish between product and seller uncertainty, show that product uncertainty has a stronger effect on price 27 premiums than seller uncertainty, and identify the most influential information signals that reduce product 28 uncertainty. 29 30 The study’s implications for the emerging role of product uncertainty in online markets are discussed. 31 32