How Do Assurance Mechanisms Interact in Online Marketplaces? A Signaling Perspective

Although multiple assurance mechanisms (e.g., third-party certification, web assurance seals, and reputation systems) are commonly used in online marketplaces to ameliorate transaction risks, there is little understanding about how different assurance mechanisms may be combined, and under what conditions these serve as substitutes or complements. From a signaling perspective, this study examines how two broad categories of assurance mechanisms, those that function as default-independent signals (signals that reveal seller quality in general and offer no direct protection to buyers should anything go wrong with transactions) and those that function as default-contingent signals (signals that reveal seller quality specific to transactions and offer direct protection to buyers should anything go wrong with transactions), interact to impact sales performance of sellers, and how this interaction may be moderated by product type (search versus experience products). Empirical results show that for transactions involving search products, a default-independent signal and a default-contingent signal substitute each other, but for transactions involving experience products, the two types of signals complement each other. The results can account for the effects of combinations of assurance mechanisms as well as how these may be moderated by contextual factors.