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Is there a market for trusted car data?
Abstract
The used-car trade is characterized by information asymmetries between buyers and sellers leading to uncertainty and distrust, thus causing market inefficiencies. Prior research has shown that blockchain offers a solution: a transparent, trustworthy and verified car history that addresses these issues in the market for ‘lemons’. Yet, whether or not there really is a market for trusted car data remains an open question. In particular, it is unclear if trusted car data increases transparency in the market for lemons and how market participants value increased transparency. Hence, through a market game with 50 participants, we explored the effects of trusted car data on the sales price of the cars, and the relative revenue of buyers and sellers. Additionally, we conducted interviews with the participants to elicit the perceived customer value. The results show that blockchain enables an increase in transparency and creates value for both buyers and sellers.
... These are confronted with problems of information asymmetry during used-car sales (input) [3]. The desired outputs of the use of blockchain applications are a reduction of information asymmetries and a consequent increase in market fairness [8,43] (output). The use of multi-party certificates-which are provided by blockchain DApps that draw on the resources of many and consequently provide more comprehensive information, and come with the ability to provide proof-of provenance of the record history (technical subsystem)-affords sellers the action potential to better signal the quality of their cars [8]. ...
... The desired outputs of the use of blockchain applications are a reduction of information asymmetries and a consequent increase in market fairness [8,43] (output). The use of multi-party certificates-which are provided by blockchain DApps that draw on the resources of many and consequently provide more comprehensive information, and come with the ability to provide proof-of provenance of the record history (technical subsystem)-affords sellers the action potential to better signal the quality of their cars [8]. This ability of sellers to better signal product quality is due to both the increased amount of data collected and combined from multiple sources and the increased trust in data quality due to the difficulty of faking data. ...
... Many scholars have begun to investigate the use of blockchain technology as a way of collecting and maintaining data throughout a car's life cycle [43,67] in order to provide trusted car history certificates to buyers and sellers [7,8].That research provides us with valuable insights into the technical foundations of how blockchain can be applied to the used-car market. While it is essential to have an in-depth understanding of the opportunities of the technical subsystem, it is just as important to understand how it unfolds in and impacts the users in the social subsystem and how this interaction shapes and is shaped by information [53]. ...
Markets in which similar goods of different qualities are sold suffer from information asymmetries and their negative consequences. Dealers have established themselves, and mediate these markets through their use of quality signals. While these signals help to mitigate information asymmetries, these markets still function well below their optimum: a large share of goods sold are overpriced, and most of the benefits are reaped by intermediaries. In this paper we build on prior research that proposes the use of blockchain as an enabler for trusted, decentralized asset documentation. Applying a socio-technical lens, we describe how blockchain-enabled multi-party certification affords dealers the action potential to send signals that are more closely correlated to the unobservable quality of the underlying good (i.e., signals with a higher fit) than the signals they send today. We then both theorize and experimentally explore the market effects of the two types of signals. Using data from a laboratory market experiment with 210 participants, we find empirical evidence that multi-party certification affords dealers the action potential to send signals of significantly higher fit than those sent by intermediaries alone, leading to a reduction in information asymmetries, a more efficient allocation of goods, and an increase in market fairness.
... In our study, we explore business potentials of 'trusted car data' for used car dealership. According to Bauer et al. [20] the term 'trusted car data' corresponds to securely stored and trustworthy car data, which is in our case achieved by the usage of a blockchain-based application. Prior discussions in the research community proposed that creation of the Internet of trusted data is determined by the following factors: robust digital identity, distributed internet trust authorities, distributed safe computation, and universal access -and blockchain technology is one possible way to address these [21]. ...
... Bauer et al. [20] showed that trusted car data creates value for both buyers and sellers of cars and that there is a market potential for trusted data. More specifically, they discovered that -with private persons acting as buyer and seller -a car can be sold at a higher price if trusted car data is available. ...
... Our results provide evidence that by following the abstract design principles we defined, using trusted car data can solve current problems experienced by used car dealers and reduce information asymmetries. We further found that in contrary to used car buyers and private sellers who profit from increased transparency in the market [20], used car dealers fear reduced margins due to too much transparency. Still, used car dealers do not fear to be replaced by technology in the future since the use of a trusted car data platform -e.g., in the form of our three prototypes -creates value for them. ...
The used car market is full of mistrust and uncertainties. Providing a vehicle history with trusted car data increases market transparency but also threatens the market position of used car dealers. But does a vehicle history also provide opportunities for them? Based on interviews with used car dealers, we propose three prototypes addressing current problems. The evaluation results of these prototypes indicate that they could improve the current market situation by easing data access , increasing the efficiency of sales related processes, and by expanding the competences of used car dealers. This paper is one of only few papers analyzing the current situation of used car dealers in the light of emerging new technologies. It indicates that used car dealers do not necessarily become disintermediated by the provision of trusted car data but rather have opportunities to reinvent themselves.
... In our study, we explore business potentials of 'trusted car data' for used car dealership. According to Bauer et al. [20] the term 'trusted car data' corresponds to securely stored and trustworthy car data, which is in our case achieved by the usage of a blockchain-based application. Prior discussions in the research community proposed that creation of the Internet of trusted data is determined by the following factors: robust digital identity, distributed internet trust authorities, distributed safe computation, and universal access -and blockchain technology is one possible way to address these [21]. ...
... Bauer et al. [20] showed that trusted car data creates value for both buyers and sellers of cars and that there is a market potential for trusted data. More specifically, they discovered that -with private persons acting as buyer and seller -a car can be sold at a higher price if trusted car data is available. ...
... Our results provide evidence that by following the abstract design principles we defined, using trusted car data can solve current problems experienced by used car dealers and reduce information asymmetries. We further found that in contrary to used car buyers and private sellers who profit from increased transparency in the market [20], used car dealers fear reduced margins due to too much transparency. Still, used car dealers do not fear to be replaced by technology in the future since the use of a trusted car data platform -e.g., in the form of our three prototypes -creates value for them. ...
The used car market is full of mistrust and uncertainties. Providing a vehicle history with trusted car data increases market transparency but also threatens the market position of used car dealers. But does a vehicle history also provide opportunities for them? Based on interviews with used car dealers, we propose three prototypes addressing current problems. The evaluation results of these prototypes indicate that they could improve the current market situation by easing data access , increasing the efficiency of sales related processes, and by expanding the competences of used car dealers. This paper is one of only few papers analyzing the current situation of used car dealers in the light of emerging new technologies. It indicates that used car dealers do not necessarily become disintermediated by the provision of trusted car data but rather have opportunities to reinvent themselves.
... The cardossier game helps designers of the cardossier early-on inform their design decisions by providing a very realistic environment, i.e. 2 We do not provide a very detailed description of the cardossier game as it is not central for the current study. However, we encourage the reader to consult the manuscript [48] which describes in detail the design of the cardossier game. interaction of users on a platform that is familiar to them. ...
... 27% of the participants had already experienced buying a car via an online used car marketplace. Directly after the game, the participants were asked to provide their feedback about their experience in the game and perception of trust in a semi-structured interview [48]. The interviews were recorded, transcribed, and coded. ...
... Altogether, this process makes data more trusted. Simulating the used-car market, Bauer et al.[48] demonstrated a positive impact of the trusted car data both for buyers and sellers. Similar projects emerge in different domains, led by both academia and practice. ...
Trust is a crucial component for successful transactions regardless of whether they are executed in physical or virtual spaces. Blockchain technology is often discussed in the context of trust and referred to as a trust-free, trustless, or trustworthy technology. However, the question of how the trustworthiness of blockchain platforms should be demonstrated and proven to end users still remains open. While there may be some genuine trust in the blockchain technology itself, on an application level trust in an IT artifact needs to be established. In this article, we examine how trust-supporting design elements may be implemented to foster an end user's trust in a blockchain platform. We follow the design science paradigm and suggest a practically useful set of design elements that can help designers of blockchain platforms to build more trustworthy systems.
... The case description and the subsequent analysis will be useful for setting up and governing blockchain consortia that develop platforms for the used car market and beyond. It will inform public agencies' choices regarding the opportunities and challenges of blockchain-based collaborative value generation when entering blockchain consortia ( Bauer et al. 2019). It should also educate blockchain startups and help them understand what it means to collaborate with public agencies. ...
... The Cardossier project aims to improve the Swiss car ecosystem by storing car usage data in a blockchain. There are three major areas for improvement ( Bauer et al. 2019): ...
... As the initial funding lasted for only 18 months, crafting an appropriate business model for the time afterwards was paramount ( Bauer et al. 2019). How could a platform benefit from the increased car value? ...
Blockchain technologies enable new forms of data sharing in platforms. This raises questions around how they are jointly developed and managed in blockchain consortia and what role public agencies play in those efforts. Based on an analysis of prior work on data sharing in public-private partnerships and other blockchain projects, we analyze the case of the Cardossier. The Cardossier project and (later) association develops a platform to link the public and private actors in the Swiss car ecosystem. The participating car registration authority has the roles of an actor in interorganizational processes, supplier of data, source of trust, guarantor of data quality, user of data, and incentive for making goods public. We conclude that the public agencies have a very important role in blockchain consortia and propose that they should use this role actively as part of their efforts to create public value.
... A novel approach to addressing the challenges of information asymmetries and mistrust in the used car market that has recently been proposed in research is the provision of authenticated data (Hammi et al. 2018)-sometimes also referred to as certified data (Chanson et al. 2019) or trusted data (Notheisen et al. 2017;Bauer et al. 2019). It has been proposed that distributed ledger technology can effectively ensure high-quality, authenticated data: It can help ensure the immutability of data and provide proof of provenance (Koutroumpis et al. 2020). ...
... While the studies offer promising results about the potentials of authenticated car data to reduce information asymmetries in the used car market (Bauer et al. 2019), it is unclear how authenticated data will be used in this context and how they may change established negotiation behaviors. Further, how the availability of authenticated data may affect the sellers' tendency to lie about a car's quality and whether they will change behaviors not related to the content of the data itself, such as BATNA, remain open questions. ...
Online peer-to-peer (P2P) sales of used and or high-value goods are gaining more and more relevance today. However, since potential buyers cannot physically examine the product quality during online sales, information asymmetries and consequently uncertainty and mistrust that already exist in offline sales are exacerbated in online markets. Authenticated data platforms have been proposed to solve these problems by providing authenticated data about the negotiation object, integrating it into text-based channels secured by IT. Yet, we know little about the dynamics of online negotiations today and the impact of the introduction of authenticated data on online negotiation behaviors. We address this research gap based on two experimental studies along with the example of online used car trade. We analyze users’ communicative and strategic actions in current P2P chat-based negotiations and examine how the introduction of authenticated data affects these behaviors using a conceptional model derived from literature. Our results show that authenticated data can promote less complex negotiation processes and more honest communication behavior between buyers and sellers. Further, the results indicate that chats with the availability of authenticated data can positively impact markets with information asymmetries. These insights provide valuable contributions for academics interested in the dynamics of online negotiations and the effects of authenticated data in text-based online negotiations. In addition, providers of trade platforms who aim to advance their P2P sales platforms benefit by achieving a competitive advantage and a higher number of customers.
... Prior research indicates that there indeed is a market for trusted car data [9] and that a complete Cardossier has a value in the order of 100 Euros. This research assumes that this data is available in the market place and stakeholders are willing to share it. ...
... The other two types of data are relevant. If car usage data is relevant and the platform can persuade the stakeholders to release it, the platform can not only expand its reach on the value chain, but also establish itself as an actor in car data trade [9]. If personal data of the sellers or buyers is important, a used car platform can establish itself as a mediator of interpersonal trust [2]. ...
Future used car markets may use personal data to reduce information asymmetries between car sellers and buyers, e. g. on past driving behavior. Reducing information asymmetries is attractive for used car platforms as they can move from pure information provision to orchestrating transactions. However, car sellers and buyers have to agree to sharing personal data. What kind of data is interesting for them? Under what circumstances are they willing to share this data? What should a platform do to support data sharing? We explore those research questions as part of the Cardossier project by conducting experiments with the Car-Market Game, simulating a future car market. The results indicate that there is no market for pure personal data (e. g. photographs of sellers), but there is a market for car usage data. From future used car platforms the participants expect disclosure control and disclosure transparency in an environment free of interpersonal trust.
... They are found in the shared use of resources such as carsharing (Willing et al. 2017) or in numerous second-hand or resale markets (e.g. Bauer et al. 2020). These initiative help to reduce the ecological footprint, albeit not being able to fully compensate for it (Parrique et al. 2019). ...
... Adaptability of electronic markets Im et al. 2020, Ujwary-Gil and Potoczek 2020 2. Environmental sustainability Business models for sustainability Business model design and assessment (Bouwman et al. 2020, Gimpel et al. 2020, Wit and Pylak 2020 Research method (vom Brocke and Mädche 2019) Smart energy business models Dedrick et al. 2015, Kranz et al. 2015, Schwister and Fiedler 2015, Alt and Wende 2020, Paukstadt and Becker 2020, Weking et al. 2020 Resource efficiency in specific sectors Hospitality industry (Sigala 2016;Mingotto et al. 2020;Nam et al. 2020) E-invoicing (Cuylen et al. 2016) Residential sector (Hopf et al. 2018) High-frequency trading (Stan 2018) Reuse and recycling of goods Willing et al. 2017, Dorfleitner et al. 2018, Hein et al. 2019, Bauer et al. 2020 3. Social sustainability Platforms in the health sector Akter et al. 2010, Menschner et al. 2011, Sultan and Mohan 2013, Simons et al. 2014 ...
... A series of publications report on different aspects from the research project: design for understandability and trustworthiness in blockchain platforms Zavolokina et al. (2019), business value of blockchain technology (Bauer et al. 2019a), token design (Miscione et al. 2018), data quality in blockchain interorganizational networks , blockchain consortium development. Furthermore, a recent study has demonstrated a positive influence on transparency of the Cardossier on the used car market and value for buyers and sellers of used cars (Bauer et al. 2019b). In our study, we focus on the consumers' perspective (i.e., the perspective of car buyers) and exclude organizational perspectives. ...
... On the other hand, we acknowledge that further research is needed to make a stronger theoretical contribution from the micro-economic perspective and address the macro-economic perspective (a further study addresses it (Bauer et al. 2019b). Some limitations should be highlighted, which should guide further study. ...
The second-hand automotive market is one with the least trust from consumers. Customers on the second-hand car market suffer from such problems as the car being in worse condition than initially indicated, accident damage that is not disclosed, fraud, etc. Akerlof, described the market for used cars as an example of the problem of information asymmetries and resulting quality uncertainty. In order to cope with quality uncertainties, used car buyers actively engage themselves in information seeking. Blockchain technology promises to automatize the tracking of cars through their lifecycles and provide reliable information at any point in time it is needed. In our study, we investigate the problems car buyers face during information seeking and propose requirements for the design of a blockchain-based system to address these.
... The literature review shows that only a minority of extant studies aim at solving electronic market-related challenges (e.g., Burdisso et al., 2019;Irarrázaval et al., 2021). Among business applications, XAI is especially relevant for electronic markets, as trust is paramount in all buyer-seller relationships (Bauer et al., 2020;Marella et al., 2020). Promising first studies on XAI in electronic markets focus on recurring use cases, for example, recommender systems in entertainment (e.g., Zhdanov et al., 2021), patient platforms in healthcare (e.g., van der Waa et al., 2021), and credit platforms in finance (e.g., Moscato et al., 2021). ...
The quest to open black box artificial intelligence (AI) systems evolved into an emerging phenomenon of global interest for academia, business, and society and brought about the rise of the research field of explainable artificial intelligence (XAI). With its pluralistic view, information systems (IS) research is predestined to contribute to this emerging field; thus, it is not surprising that the number of publications on XAI has been rising significantly in IS research. This paper aims to provide a comprehensive overview of XAI research in IS in general and electronic markets in particular using a structured literature review. Based on a literature search resulting in 180 research papers, this work provides an overview of the most receptive outlets, the development of the academic discussion, and the most relevant underlying concepts and methodologies. Furthermore, eight research areas with varying maturity in electronic markets are carved out. Finally, directions for a research agenda of XAI in IS are presented.
... here, [10] propose trusted sensors to collect car usage data, and (ii) by incentivizing participating agents to provide the correct and complete data. A shared market for car data can provide the necessary funding to make it attractive for partners to provide high-quality data [7]. In addition, agents from the public sector may penalize those who deliver incorrect or incomplete information for official purposes, e.g., during regular checks for car roadworthiness [44]. ...
Inspired by an industry initiative to address the celebrated market for lemons (poor-quality used cars), we investigate how incentives for a permissioned blockchain-based system in the automobile ecosystem can be designed to ensure high-quality data storage and use by different stakeholders. The peer-to-peer distributed ledger platform connects organizations and car owners with disparate interests and hidden intentions. While previous literature has chiefly examined incentives for permissionless platforms, we leverage studies about crowdsensing applications to stimulate research on incentives in permissioned blockchains. This paper uses the action design research approach to create an incentive system featuring a rating mechanism influenced by data correction measures. Furthermore, we propose relying on certain institutions capable of assessing data generated within the system. This combined approach of a decentralized data correction and an institutionalized data assessment is distinct from similar incentive systems suggested by literature. By using an agent-based model with strategy evolution, we evaluate the proposed incentive system. Our findings indicate that a rating-based revenue distribution leads to markedly higher data quality in the system. Additionally, the incentive system reveals hidden information of the agents and alleviates agency problems, contributing to an understanding of incentive design in inter-organizational blockchain-based data platforms. Furthermore, we explore incentive design in permissioned blockchains and discuss its latest implications.
... An example of such an approach is the so-called cardossier [13]. The cardossier platform leads to increased data quality [14], new business models [15], and increased market transparency [16]. It ultimately moves more used car business from the garage to online platforms [17]. ...
The used-car market is notoriously untrustworthy and shady. Certified data has been shown to help mitigate the information asymmetry, one of the major factors to an untrustworthy market. In recent times, more and more used-car dealers have had problems surviving in this competitive data-driven market. In this study, we conduct 12 interviews with used-car dealers and several meetings and workshops with employees and executives from the AMAG Group, one of the largest automotive companies in Switzerland. This creates insight into current problems for used-car dealers and how artificial intelligence can help. The problems can be abstracted to the problem of high transaction cost and its subcategories. In reducing transaction costs by utilizing artificial intelligence, new secondary problems arise. People need to trust the certificate, the analytics, and the predictions. Additionally, the data and analytics need to be transparent and understandable, and privacy concerns must be addressed. The implications of this study are manifold. First, we define the problems for used-car dealers on the used-car market and introduce artificial intelligence approaches to the current data-driven used-car market. Afterward, we stress that artificial intelligence needs to follow a human-centered perspective and be designed for trust.
... The theory is rooted in information economics and contract theory and advocates that different parties involved in a particular transaction have different amounts of information about the transaction. This information asymmetry has an impact on the conditions of the transaction as well as on the relationship between the parties (Bauer et al. 2020;Kirmani and Rao 2000). The application of the signal theory in consumer research has revealed that consumers faced with difficult quality decisions or with situations where information asymmetries exist search for information references which provide actions or artifacts of companies that provide consumers credible information about unobservable product quality (Rao et al. 1999). ...
Initial coin offerings (ICOs) have recently emerged as a new financing instrument for entrepreneurial ventures, spurring economic and academic interest. Nevertheless, the impact of exogenous and endogenous signals on the performance of ICOs as well as the effects of the cryptocurrency hype and subsequent downfall of Bitcoin between 2016 and 2019 remain underexplored. We applied ordinary least squares (OLS) regressions based on a dataset containing 1597 ICOs that covers almost 2.5 years. The results show that exogenous and endogenous signals have a significant effect on the funds raised in ICOs. We also find that the Bitcoin price heavily drives the performance of ICOs. However, this hype effect is moderated, as high-quality ICOs are not pegged to these price developments. Revealing the interplay between hypes and signals in the ICO’s asset class should broaden the discussion of this emerging digital phenomenon.
... Likewise, several cloud providers recently began offering 'AI as a Service' (AIaaS), referring to web services for organizations and individuals interested in training, building, and deploying AI-based systems (Dakkak et al. 2019;Rai et al. 2019). Although cost-and time-saving opportunities have triggered a widespread implementation of AI-based systems and services in electronic markets, trust persists to play a pivotal role in any buyer-seller relationship (Bauer et al. 2019;Marella et al. 2020). Consequently, TAI is of increasing relevance to electronic markets and its research community. ...
Artificial intelligence (AI) brings forth many opportunities to contribute to the wellbeing of individuals and the advancement of economies and societies, but also a variety of novel ethical, legal, social, and technological challenges. Trustworthy AI (TAI) bases on the idea that trust builds the foundation of societies, economies, and sustainable development, and that individuals, organizations, and societies will therefore only ever be able to realize the full potential of AI, if trust can be established in its development, deployment, and use. With this article we aim to introduce the concept of TAI and its five foundational principles (1) beneficence, (2) non-maleficence, (3) autonomy, (4) justice, and (5) explicability. We further draw on these five principles to develop a data-driven research framework for TAI and demonstrate its utility by delineating fruitful avenues for future research, particularly with regard to the distributed ledger technology-based realization of TAI.
... Various architectures have been proposed for providing secure vehicle-to-vehicle communication using blockchain technologies [43], [44]. Blockchain can provide data security and trusted communication between vehicles and enable protection from cyber-attacks, while maintaining vehicle-data privacy and trust at the same time [14], [45], [46]. With the integration of IoT and blockchain technologies, the vehicles can provide telematics to a secure centralized location for monitoring and control [47], [48]. ...
Transactions related to vehicles include manufacturing, buying, selling, paying insurance(takaful), obtaining regular inspection, leasing a vehicle from banks, getting in an accident, engaging in a traffic violation, calculating price predictions and renting a vehicle. Many people perform transactions related to vehicles in their daily life; transportation authorities also perform vehicle transactions as part of managing vehicle fleets. But tracking these transactions is a challenging task. There are countrywide solutions that uses centralized systems. However, these solutions have problems with trust management, transparency, and access control. Therefore, we believe there is still room for integrated automation of various vehicle-related transactions. In this paper, we present a blockchainbased framework for vehicle tracking that incorporates the mentioned features. Moreover, blockchain is customized to enable usage control for additional transactions, such as inspection, renting and islamic insurance. The usage control model is integrated with IoT devices to continuously monitor the vehicles for certain conditions and remotely revoke access if needed [1]. The complete transaction set is recorded over an immutable ledger that provides trust, transparency and a complete history of record. In this paper, we also presents a prototype implementation of a permissioned blockchain, which will be made available under the GNUv3 General Public License. Performance analysis is performed on the newly proposed framework implementation over the permissioned blockchain to measure its adoption and suitability.
... Kollmann et al. (2020) use a theorydriven case study approach to consider principles of cooperative theory as a foundation of Blockchain enabled electronic marketplaces. The design science approach (Hevner et al. 2004) is used by Bauer et al. (2020) to create a market game to explore the effect of trusted data in a used car market. Design science is also used by Weking et al. (2020) to develop a taxonomy of Blockchain business models and associated archetypical patterns. ...
... This also marks the initial case that brought together the consortium, namely addressing this information asymmetry through a blockchain-based digital dossier, a car dossier, that stores all relevant events during the lifecycle of a car. Thus, the stakeholders aim to store and process all car-related data and information, and jointly create a car dossier for all cars on the market, aiming to reduce asymmetries and increase market transparency (Bauer et al., 2019). Similar solutions like an Eurotax or a Carfax report might exist today, yet given their shortcomings (e.g., the lack of trust toward one single provider and the lack of trust in data quality; or inconsistency and incompleteness of a central registry of one provider; and high costs that do not justify the benefits) they only showed limited impact on the market so far. ...
Blockchain technology is expected to create a variety of new opportunities for businesses. Yet, little is known about how the technology actually enables to create value and how companies will be able to exploit true business value. However, without a clear understanding of the value creation potential from the technology, and corresponding adaption of business practices, the realization of value is doomed to failure. Hence, we contribute to this gap by exploring and explicating the specificities of value creation from blockchain in the ecosystem of a car. In the course of an exploratory case study analysis, over a time period of 2 years, we conducted three iterations of interviews and workshops with industry and blockchain experts from five diverse stakeholder groups. In brief, we provide early evidence that (1) blockchain enables value creation through: Distributed Product Innovation, Shared Operational Efficiency, and Controlled Customer Intimacy. Furthermore, we discuss our learnings for businesses in other domains aiming to leverage value from blockchain technology. We do so, by deriving guidelines for each blockchain value discipline. Furthermore, we give recommendations on how blockchain projects in ecosystems should approach multiple blockchain value potentials.
Despite the large number of resources that blockchain has, and continues to mobilize, it is not yet fully understood what makes the technology unique and why people engage with it. Hence, “Why Blockchain?” is a question that many scientists and managers still ask themselves or have to answer when facing the technology's critics. While the question is undoubtedly justified, it cannot always be answered from a purely technical perspective. Thus, in this study, we apply a socio-technical IS artifact perspective and analyze the reasons managers involved in blockchain consortia have for using blockchain technology. Based on a multiple-case study of 19 blockchain consortia, including interviews with 53 stakeholders, we explicate 19 different motives that justify engagement with the technology in practice. Further, we identify the systemic character of tokenization and the importance of the socio-technical interplay of aspects like power decentralization that justify the necessity of blockchain
The used car market has long been an example of a market rife with information asymmetry between sellers and buyers. Since most consumers have little experience and knowledge in buying cars, they rely on the historical vehicle documents provided only by car dealers, which might be insufficient to make pre-purchase judgments. To receive more information about events that occurred in the vehicle’s past, buyers need to spend time collecting other related documents from different sources. The whole process is time-consuming and leads to quality uncertainties causing market inefficiency. Such a problem can be alleviated by blockchain technology by using nodes of a computer network to record the historical information of a car, where the chain of data cannot be falsified, creating transparent, verified, and easy access to all documents. Accordingly, we propose a Hyperledger-based approach and simulate the acquisition time of historical vehicle data to illustrate the blockchain application to reduce information asymmetries in the used car market. In Hyperledger Fabric, all business network transactions are recorded on the smart contracts, allowing the records to coexist among the participants, including dealers, maintenance plants, motor vehicle offices, police offices, and buyers. This blockchain technology application mitigates information asymmetries between buyers and sellers, guarantees the integrity and transparency of data, and shortens the time obtaining historical car information.KeywordsAsymmetric informationBlockchainUsed carHyperledgerSmart contract
Through the increase in vehicle sales transactions globally, new ways are being created to change the current model of vehicle ownership transfer systems. The integrity of the data in this type of operation must be the highest priority to avoid different types of fraud. These range from the manipulation of vehicle data, to the falsification of the identity of the seller as well as the buyer. To address this problem, we propose the implementation of a system based on blockchain, which is characterized by decentralization, security, and transparency of information to let users know when a fraud may occur in the purchase transaction process. To accomplish this, a systematic review of the literature is carried out, through which the most appropriate elements for the implementation of the proposed system's infrastructure will be determined. In this review, the problem will be presented, then various applications of this technology in the automotive sector will be addressed, and finally, the most important concepts to be considered will be developed. Why this technology is the most appropriate to solve this problem will conclude the review. KeywordsBlockchainSmart contractsConsensus algorithmsVehicle ownership transaction processFrauds
As an established academic journal in the e-commerce and digital platforms fields, Electronic Markets (EM) features a diverse range of topics and occupies a significant role in the information systems field. The study investigates EM’s topic diversity over the time period 2009–2020 using a text mining analysis and a bibliometric analysis and identifies 28 cluster groups. The analysis reveals that the top three topics are 1) service quality, 2) blockchain and other shared trust building solutions, their impact and credibility, as well as 3) consumer buying behavior and interactions. EM's core identity lies in a balanced set of core themes that bring technological, business or human/ social perspectives to the research of networked business and digital economy. This includes research on digital and smart services, applications, consumer behavior and business models, as well as technology and e-commerce data. Ethical and sustainability related topics are however still less present in EM.
This position paper discusses the challenges of blockchain applications in businesses and the public sector related to an excessive degree of transparency. We first point out the types of sensitive data involved in different patterns of blockchain use cases. We then argue that the implications of blockchains’ information exposure caused by replicated transaction storage and execution go well beyond the often-mentioned conflicts with the GDPR’s “right to be forgotten” and may be more problematic than anticipated. In particular, we illustrate the trade-off between protecting sensitive information and increasing process efficiency through smart contracts. We also explore to which extent permissioned blockchains and novel applications of cryptographic technologies such as self-sovereign identities and zero-knowledge proofs can help overcome the transparency challenge and thus act as catalysts for blockchain adoption and diffusion in organizations.
Blockchain systems continue to attract significant interest from both practitioners and researchers. What is more, blockchain systems come in various types, such as cryptocurrencies or as inter-organizational systems in business networks. As an example of a cryptocurrency, Bitcoin, one of the most prominent blockchain systems to date and born at the time of a major financial crisis, spearheaded the promise of relying on code and computation instead of a central governing entity. Proponents would argue that Bitcoin stood the test of time, as Bitcoin continues to operate to date for over a decade. However, these proponents overlook the never-ending, heated debates “behind the scenes” caused by diverging goals of central actors, which led to numerous alternative systems (forks) of Bitcoin. To accommodate these actors’ interests in the pursuit of their common goal is a tightrope act, and this is where this dissertation commences: blockchain governance. Based on the empirical examples of various types and application domains of blockchain systems, it is the goal of this dissertation to 1) uncover governance patterns by showing, how blockchain systems are governed, 2) derive governance challenges faced or caused by blockchain systems, and, consequently, to 3) contribute to a better understanding to what blockchain governance is. This dissertation includes four parts, each of these covering different thematical areas: In the first part, this dissertation focuses on obtaining a better understanding of blockchain governance’s context of reference by studying blockchain systems from various application domains and system types, for example, led by inter-organizational networks, states, or an independent group of actors. The second part, then, focuses on a blockchain as an inter-organizational system called “cardossier”, a project I was involved in, and its governance as a frame of reference. Hereupon, for one, I report on learnings from my project involvement in the form of managerial guidelines, and, for two, I report on structural problems within cardossier, and problems caused by membership growth and how they can be resolved. The third part focuses on a wider study of blockchains as inter-organizational systems, where I summarize findings of an analysis of 19 blockchain consortia. The findings, for one, answer the question of why blockchain consortia adopt blockchain technology, and, for two, show internal and external challenges these systems faced to derive managerial recommendations. The fourth and last part studies blockchain governance’s evolution and contributes an analysis of blockchain’s governance features and its contrast to established modes of governance. These four parts, altogether, have scientific value as they increase our understanding on blockchain governance. Consequently, this dissertation contributes to the body of knowledge on modes of governance, distributed system governance, and blockchain governance in general. I do so, by grounding the concept of blockchain governance in empirical detail, showing how these systems are governed on various application domains and system types, and by studying empirical challenges faced or caused by these systems. This approach is relevant and necessary, as blockchain systems in general, but particularly outside of cryptocurrencies, mostly still are in pursuit of a sustainable blockchain governance. As blockchains can be expected to continue to mature, the upcoming years offer very fruitful ground for empirical research along the empirical insights and theoretical lines shown in this dissertation.
Future used car markets may use personal data to reduce information asymmetries between car sellers and buyers, e. g. on past driving behavior. Reducing information asymmetries is attractive for used car platforms as they can move from pure information provision to orchestrating transactions. However, car sellers and buyers have to agree to sharing personal data. What kind of data is interesting for them? Under what circumstances are they willing to share this data? What should a platform do to support data sharing? We explore those research questions as part of the Cardossier project by conducting experiments with the Car-Market Game, simulating a future car market. The results indicate that there is no market for pure personal data (e. g. photographs of sellers), but there is a market for car usage data. From future used car platforms the participants expect disclosure control and disclosure transparency in an environment free of interpersonal trust.
The automotive market is in the top three markets with least trust from consumers (followed by banks, and telecommunications industry) (Lades 2017). In particular, in the used car market, consumers encounter such problems as: a car in a poorer condition than initially indicated, accident damage that was not previously disclosed, little or no documentation provided, and fraud. Nobel prize winner G.A. Akerlof described the market for used cars as an example of the problem of information asymmetries and resulting quality uncertainty (Akerlof 1970). In my dissertation, I look at how an application on top of blockchain technology, which is claimed to bring trust by design due to its inherent characteristics, may be designed as a novel solution to resolve problems in the ‘Market for Lemons’ and, thus, enhance trust between buyers and sellers. While there may be some genuine trust in blockchain technology itself, on an application level, trust in an IT artifact needs to be established. This need for trust establishment is at heart of this dissertation project. This cumulative dissertation is structured in three parts. In part I, I explore the characteristics of blockchain platforms and relevant aspects for their design (i.e., the data quality aspect and token design). In part II, I propose a design to address problems associated with a of lack of trust, caused by information asymmetries, between car buyers and car sellers with the help of an IT artifact: a blockchain-based cardossier. The cardossier application reflects a car’s history over its whole lifecycle (from production to utilization). The proposed design relates to the end-user-facing frontend application. In this part, I focus on the problems and needs of used car buyers, the requirements placed for the design of the application, the actual elements of the application design, and the effects of the application’s usage in the ‘Market for Lemons’. The results show that the problems buyers experience are a paradox of having a large variety of information sources available about brands, and the quality characteristics and performance of certain models; while information about a specific car is not transparent and often even hidden. Though providing more information about a used car leads to fewer information asymmetries in general, advanced information elements are beneficial in improving the situation further. As for trust, such a system enhances trust between buyers and sellers and, in general, makes the overall purchase process more trustworthy. However, to achieve these positive effects, the quality of the stored information should be guaranteed and properly communicated to the end-user. Additionally, exploring the use of the cardossier, embedded into an online used car sales platform, several groups of factors (technology-related, data-related, design-related, user-related) that play an important role in trust formation were revealed. Furthermore, through adopting the perspective of technology affordances, we identified blockchain platform affordances related to the trust in a blockchain platform. In part III, the transfer of a research project into practice, preparation for market entry, associated tensions the blockchain consortium had to face while implementing the platform are discussed along three themes: consortium management, business value, and governance. Altogether, the three parts of the dissertation provide better understanding of blockchain platforms, applications built on top of them and their usage in the ‘Market for Lemons’. Thus, this dissertation contributes to the body of knowledge on trust design in the context of blockchain technology and applications on top of it, and also to the broader literature on examining the ‘Market for Lemons’ and solutions to its problems. As blockchain applications are still being developed, and as we are just beginning to understand the potential of the blockchain technology, such research has scientific value in terms of design and organizational implications.
The used car market is characterized by information asymmetries and mistrust. Blockchain technology promises to resolve these problems using a system which stores data over the life cycle of a vehicle. However, while blockchain technology is strong in preserving the stored information, sense-making of this information is still essential to bring value to end consumers of the system. In this paper, we take an exploratory approach and create a prototype, which is then evaluated in realistic car sale conversations between buyers and sellers. We demonstrate and discuss how the interplay of different design elements of an application, built on top of a blockchain-based platform, helps to reduce information asymmetries and enhance trust. Our findings suggest that though providing more information about a used product (a car) leads to fewer information asymmetries in general, a reputation mechanism and data analysis are both beneficial in improving the situation further. As for trust, such a system enhances trust between buyers and sellers and, in general, makes the overall purchase process more trustworthy. However, to achieve these positive effects, the quality of the stored information should be guaranteed and properly communicated to the end-user.
The blockchain technology challenges the view on established modes of governance by offering distributed authentication without the need for a central authority, which is well-exemplified by Bitcoin. While the governance of and through Bitcoin is well-accentuated in research, we spotlight impacts on governance which blockchain-based systems bring to inter-organizational settings as well as their purpose. To build our arguments, we explore those impacts on two contrasting cases from the domains of automotive and public administration and relate them to cryptocurrencies. Relying on interviews with experts from said organizations utilizing blockchain technology, and a content analysis of related grey literature, we discuss established forms of governance as well as platforms and infrastructures against the impacts which blockchain-based systems cause. After referring those to the concepts of markets, hierarchies, networks, and tribes, we critically reflect on their purpose by utilizing the notions of infrastructures and platforms, and conclude blockchain-based systems to possibly alter the way established modes of governance are enacted.
Blockchain is expected to create a variety of new opportunities for businesses. Yet, little is known about how companies can exploit business value from the technology. However, without a clear understanding of how, and corresponding adaption of business practices, the realization of value is doomed to failure. Hence, we contribute to this gap by analyzing and explicating the specificities of value creation from blockchain in the ecosystem of a car. In the course of an exploratory case analysis we conducted interviews and workshops with industry and blockchain experts from five diverse stakeholder groups. In brief, we provide early evidence that (1) blockchain enables value creation through: Distributed Product Innovation, Controlled Customer Intimacy and Shared Operational Efficiency. Further, (2) we derive guidelines and discuss learnings for other businesses aiming to leverage value from blockchain technology.
Recent research reports the need for consistent incentives in blockchain-based systems. In this study, we investigate how incentives for a blockchain-based inter-organizational network should be designed to ensure a high quality of data, exchanged and stored within the network. For this, we use two complementary methodological approaches: an Action Design Research approach in combination with agent-based modelling, and demonstrate, through the example of a real-world blockchain project, how such an incentive system may be modelled. The proposed incentive system features a rating mechanism influenced by measures of data correction. We evaluate the incentive system in a simulation to show how effective the system is in terms of sustaining a high quality of data. Thus, the paper contributes to our understanding of incentives in inter-organizational settings and, more broadly, to our understanding of incentive mechanisms in blockchain economy.
The automotive market is in the top three markets with the least trust from consumers. In particular, in the secondhand car market, consumers suffer from such problems as the car being in worse condition than initially indicated, accident damage that is not disclosed, fraud, etc. Akerlof, described the market for used cars as an example of the problem of information asymmetries and resulting quality uncertainty. In order to cope with quality uncertainties, used car buyers actively engage themselves in information seeking. Blockchain technology promises to automatize the tracking of cars through their lifecycles and provide reliable information at any point in time it is needed. In our study, we investigate the problems car buyers face during information seeking and propose requirements for the design of a blockchain-based system to address these.
Large-scale rumor spreading could pose severe social and economic damages. The emergence of online social networks along with the new media can even make rumor spreading more severe. Effective control of rumor spreading is of theoretical and practical significance. This paper takes the first step to understand how the blockchain technology can help limit the spread of rumors. Specifically, we develop a new paradigm for social networks embedded with the blockchain technology, which employs decentralized contracts to motivate trust networks as well as secure information exchange contract. We design a blockchain-based sequential algorithm which utilizes virtual information credits for each peer-to-peer information exchange. We validate the effectiveness of the blockchain-enabled social network on limiting the rumor spreading. Simulation results validate our algorithm design in avoiding rapid and intense rumor spreading, and motivate better mechanism design for trusted social networks.
While blockchain technology is commonly considered potentially disruptive in various regards, there is a lack of understanding where and how blockchain technology is effectively applicable and where it has mentionable practical effects. This issue has given rise to critical voices that judge the technology as over-hyped. Against this backdrop, this study adapts an established research framework to structure the insights of the current body of research on blockchain technology, outline the present research scope as well as disregarded topics, and sketch out multidisciplinary research approaches. The framework differentiates three groups of activities (design and features, measurement and value, management and organization) at four levels of analysis (users and society, intermediaries, platforms, firms and industry). The review shows that research has predominantly focused on technological questions of design and features, while neglecting application, value creation, and governance. In order to foster substantial blockchain research that addresses meaningful questions, this study identifies several avenues for future studies. Given the breadth of open questions, it shows where research can benefit from multidisciplinary collaborations and presents data sources as starting points for empirical investigations.
Many decentralized, inter-organizational environments such as supply chains are characterized by high transactional uncertainty and risk. At the same time, blockchain technology promises to mitigate these issues by introducing certainty into economic transactions. This paper discusses the findings of a Design Science Research project involving the construction and evaluation of an information technology artifact in collaboration with Maersk, a leading international shipping company, where central documents in shipping, such as the Bill of Lading, are turned into a smart contract on blockchain. Based on our insights from the project, we provide first evidence for preliminary design principles for applications that aim to mitigate the transactional risk and uncertainty in decentralized environments using blockchain. Both the artifact and the first evidence for emerging design principles are novel, contributing to the discourse on the implications that the advent of blockchain technology poses for governing economic activity.
Blockchain technology is expected to revolutionize the way transactions are performed, thereby affecting a vast variety of potential areas of application. While expectations are high, real world impact and benefit are still unclear. To be able to assess its impact, the first structured literature review of peer-reviewed articles is conducted. As blockchain technology is centered around a peer-to-peer network, enabling collaboration between different parties, the service system is chosen as unit analysis to examine its potential contribution. We have identified a set of characteristics that enable trust and decentralization, facilitating the formation and coordination of a service system.
Recently, the Bitcoin-underlying blockchain technology gained prominence as a solution that offers the realization of distributed trust-free systems, where economic transactions are guaranteed by the underlying blockchain. We are still at an early stage and thus require a deeper understanding of how the blockchain potentials can be realized, and what are the opportunities and challenges in so doing. Following a design science approach, we developed a proof of concept prototype that has the potential to replace a trust-based coffee shop payment solution that is based on an analogue, prepaid punch card solution. The demonstrator provides a starting point to evaluate the strengths and weaknesses of the blockchain technology when replacing a trust-based by a trust-free transaction system. We conclude that the secure and trust-free blockchain-based transaction has the potential to change many existing trust-based transaction systems, but that scalability issues, costs, and volatility in the transaction currency are hindrances.
The internet makes it easier for buyers to purchase goods from distant sellers. However, the inability of the buyer to examine the merchandise results in asymmetry of information. This paper develops a theoretical model to analyze the relationship between quality and price in a setting of asymmetrical information. In the spirit of Akerlof (1970), the model predicts that higher quality goods are less likely to be sold in the market. Since buyers have difficulty distinguishing quality, sellers would have to accept lower prices for their highest quality items. The model is tested using data from internet coin auctions. The results show that coins that are claimed to be of higher quality are less likely to sell and when they do sell do so at lower prices relative to their market value.
Trusted timestamping is a process for proving that certain information existed at a given point in time. This paper presents a trusted timestamping concept and its implementation in form of a web-based service that uses the decentralized Bitcoin block chain to store anonymous, tamper-proof timestamps for digital content. The service allows users to hash files, such as text, photos or videos, and store the created hashes in the Bitcoin block chain. Users can then retrieve and verify the timestamps that have been committed to the block chain. The non-commercial service enables anyone, e.g., researchers, authors, journalists, students, or artists, to prove that they were in possession of certain information at a given point in time. Common use cases include proving that a contract has been signed, a photo taken, a video recorded, or a task completed prior to a certain date. All procedures maintain complete privacy of the user's data.
As a commentary to Juhani Iivari's insightful essay, I briefly analyze design science research as an embodiment of three closely related cycles of activities. The Relevance Cycle inputs requirements from the contextual envi- ronment into the research and introduces the research artifacts into environ- mental field testing. The Rigor Cycle provides grounding theories and methods along with domain experience and expertise from the foundations knowledge base into the research and adds the new knowledge generated by the research to the growing knowledge base. The central Design Cycle sup- ports a tighter loop of research activity for the construction and evaluation of design artifacts and processes. The recognition of these three cycles in a research project clearly positions and differentiates design science from other research paradigms. The commentary concludes with a claim to the pragmatic nature of design science.
A frequently mentioned challenge in design
science research (DSR) is the generation of novel theory
above and beyond information technology artefacts.
This article analyzes the DSR process and extends
established frameworks for theory generation to exemplify
improvements to theory generation through methods
of grounded theory development. On a conceptual
base, we developed a theory-generating DSR approach
which integrates methods of grounded theory development
with established DSR methodology. This combination
enables a design theorist to generate theoretical
knowledge that extends the applicable knowledge base.
We do not elaborate this combination on a meta-level,
but rather provide a process model for researchers in
form of an extension of a well-known DSR model to
combine both methods in a pluralistic research design.
With this suggested research approach, scholars can
draw theoretical insights from analytical abstractions
and can improve the development of IT artefacts in a
structured way to avoid failure or repair loops.
Online markets pose a difficulty for evaluating products, particularly experience goods, such as used cars, that cannot be easily described online. This exacerbates product uncertainty, the buyer’s difficulty in evaluating product characteristics and predicting how a product will perform in the future. However, the IS literature has focused on seller uncertainty and ignored product uncertainty. To address this void, this study conceptualizes product uncertainty and examines its effects and antecedents in online markets for used cars (eBay Motors). Extending the information asymmetry literature from the seller to the product, we first theorize the nature and dimensions – description and performance – of product uncertainty. Second, we propose product uncertainty to be distinct from, yet shaped by, seller uncertainty. Third, we conjecture product uncertainty to negatively affect price premiums in online markets beyond seller uncertainty. Fourth, based on the information signaling literature, we describe how information signals – diagnostic product descriptions and third-party product assurances – reduce product uncertainty. The structural model is validated by a unique dataset comprised of secondary transaction data from used cars on eBay Motors matched with primary data from 331 buyers who bid upon these used cars. The results distinguish between product and seller uncertainty, show that product uncertainty has a stronger effect on price premiums than seller uncertainty, and identify the most influential information signals that reduce product uncertainty. The study’s implications for the emerging role of product uncertainty in online markets are discussed.
Research in IT must address the design tasks faced by practitioners. Real problems must be properly conceptualized and represented, appropriate techniques for their solution must be constructed, and solutions must be implemented and evaluated using appropriate criteria. If significant progress is to be made, IT research must also develop an understanding of how and why IT systems work or do not work. Such an understanding must tie together natural laws governing IT systems with natural laws governing the environments in which they operate. This paper presents a two dimensional framework for research in information technology. The first dimension is based on broad types of design and natural science research activities: build, evaluate, theorize, and justify. The second dimension is based on broad types of outputs produced by design research: representational constructs, models, methods, and instantiations. We argue that both design science and natural science activities are needed to insure that IT research is both relevant and effective.
The qualitative interview is one of the most important data gathering tools in qualitative research, yet it has remained an unexamined craft in IS research. This paper discusses the potential difficulties, pitfalls and problems of the qualitative interview in IS research. Building on Goffman’s seminal work on social life, the paper proposes a dramaturgical model as a useful way of conceptualizing the qualitative interview. Based on this model the authors suggest guidelines for the conduct of qualitative interviews.
Design Science Research (DSR) has sparked a renaissance of contributions to IS, but its rigor and value of DSR could be increased
by expanding its scope beyond its engineering roots to bring all modes of scientific inquiry to bear – exploratory, theoretical
, experimental, and applied science / engineering (AS/E). All DSR Cycle activities can be realized as instances of one or
more of the four modes. The rigor of DSR can therefore be defended in terms of the goals, research products, and standards
of rigor already established for each mode. There is, moreover, a synergy among the modes that can only be realized when all
four are brought to bear, because each informs the other three. To exclude any mode of inquiry from DSR, therefore, is to
impoverish knowledge about its objects of inquiry. Based on these insights, we propose a modified Cycles Model for DSR realized
under the disciplines of the four modes of scientific inquiry.
With the advent of the Internet, we have seen existing markets transform and new ones emerge. We contribute to the understanding of this phenomenon by developing a unified theory about the role that IT plays in affecting market information, transparency and market structure. In particular, we introduce a new theoretical framework which uncovers the process and the forces that, together with IT, facilitate or inhibit the emerging dominance of transparent electronic markets. Transparent electronic markets offer unbiased, complete, and accurate market information. Our effort to develop a unified theoretical framework begins with a thorough assessment of the prior literature. It also uses an inductive approach involving the case study method, in which we contrast and compare the forces that have led the air travel and financial securities markets to become increasingly transparent. Building on the electronic markets and electronic hierarchies research of Malone, Yates and Benjamin (1987), our findings suggest that IT alone does not explain a move to transparent electronic markets. Instead, we argue that enhanced electronic representation of products, and competitive and institutional forces have also played an important role in the process by which most sellers have come to favor transparent markets. 1 Sirkka Jarvenpaa was the accepting senior editor. This paper was submitted on March 16, 2005, and went through three revisions. Ranjan Dutta and Fred Collopy were reviewers for this paper.
By reducing the costs of coordination, information technology will lead to an overall shift toward proportionately more use of markets—rather than hierarchies—to coordinate economic activity.
The paper motivates, presents, demonstrates in use, and evaluates
a methodology for conducting design science (DS) research in information
systems (IS). DS is of importance in a discipline oriented to the
creation of successful artifacts. Several researchers have pioneered
DS research in IS, yet over the past 15 years, little DS research
has been done within the discipline. The lack of a methodology to
serve as a commonly accepted framework for DS research and of a template
for its presentation may have contributed to its slow adoption. The
design science research methodology (DSRM) presented here incorporates
principles, practices, and procedures required to carry out such
research and meets three objectives: it is consistent with prior
literature, it provides a nominal process model for doing DS research,
and it provides a mental model for presenting and evaluating DS research
in IS. The DS process includes six steps: problem identification
and motivation, definition of the objectives for a solution, design
and development, demonstration, evaluation, and communication. We
demonstrate and evaluate the methodology by presenting four case
studies in terms of the DSRM, including cases that present the design
of a database to support health assessment methods, a software reuse
measure, an Internet video telephony application, and an IS planning
method. The designed methodology effectively satisfies the three
objectives and has the potential to help aid the acceptance of DS
research in the IS discipline.
Two paradigms characterize much of the research in the Information
Systems discipline: behavioral science and design science. The behavioral-science
paradigm seeks to develop and verify theories that explain or predict
human or organizational behavior. The design-science paradigm seeks
to extend the boundaries of human and organizational capabilities
by creating new and innovative artifacts. Both paradigms are foundational
to the IS discipline, positioned as it is at the confluence of people,
organizations, and technology. Our objective is to describe the performance
of design-science research in Information Systems via a concise conceptual
framework and clear guidelines for understanding, executing, and
evaluating the research. In the design-science paradigm, knowledge
and understanding of a problem domain and its solution are achieved
in the building and application of the designed artifact. Three recent
exemplars in the research literature are used to demonstrate the
application of these guidelines. We conclude with an analysis of
the challenges of performing high-quality design-science research
in the context of the broader IS community.
At the tip of the hype cycle, trust-free systems based on blockchain technology promise to revolutionize interactions between peers that require high degrees of trust, usually facilitated by third party providers. Peer-to-peer platforms for resource sharing represent a frequently discussed field of application for “trust-free” blockchain technology. However, trust between peers plays a crucial and complex role in virtually all sharing economy interactions. In this article, we hence shed light on how these conflicting notions may be resolved and explore the potential of blockchain technology for dissolving the issue of trust in the sharing economy. By means of a dual literature review we find that 1) the conceptualization of trust differs substantially between the contexts of blockchain and the sharing economy, 2) blockchain technology is to some degree suitable to replace trust in platform providers, and that 3) trust-free systems are hardly transferable to sharing economy interactions and will crucially depend on the development of trusted interfaces for blockchain-based sharing economy ecosystems.
Since its introduction in 2008, blockchain technology has outgrown its use in cryptocurrencies and is now preparing to revolutionize a multitude of commercial applications including value and supply chains, business models, and market structures. This work follows design science research to guide the implementation of a blockchain-based proof-of-concept prototype that enables the automated transaction of real-world assets, such as cars, and provides a valid, transparent, and immutable record of vehicle history to market participants, authorities, and other third parties. The contribution of this study to existing research is threefold: First, it introduces a built-in mechanism to reduce transaction risk resulting from the irreversibility of transactions in blockchain-based systems. Second, it replaces a trust-based, centralized, and bureaucratic register with a tamper-free and autonomous transactional database system that comprises a secure registration and transaction process. Third, it proposes a novel approach to mitigate adverse selection effects in lemon markets by providing a reliable, transparent, and complete record of each marketable asset’s history. In total, the findings in this article illustrate the potential of blockchain-based systems but also highlight technological shortcomings and challenges for commercial applications, such as scalability or privacy issues.
In markets with quality unobservable to buyers, third-party certification is often the only instrument to increase transparency. While both sellers and buyers have a demand for certification, its role differs fundamentally: sellers use it for signalling, buyers use it for inspection. Seller-induced certification leads to more transparency, because it is informative-even if unused. By contrast, buyer-induced certification incentivizes certifiers to limit transparency, as this raises demand for inspection. Whenever transparency is socially beneficial, seller certification is preferable. It also yields certifiers larger profits, so that regulating the mode of certification is redundant.
The blockchain has reached the tip of a global hype across a variety of industries. The potential of this technology, inter alia building the fundament of Bitcoin, is assumed to be immense and disruptive – particularly for the financial industry. FinTech start-ups as well as established players however are just about to explore the true potential of blockchain technology as the fundament of (financial) markets. Before this backdrop, Information Systems research is making valuable contributions to the field by integrating the technical view on blockchain with interdis-ciplinary research approaches. Our contribution to the growing body of Information Systems literature in the context of the blockchain is twofold: First, we conduct a comprehensive litera-ture review of the most relevant and recent IS research on blockchain. Second, based on the findings of our review, we build on existing research and propose a Blockchain Market Engi-neering Framework, which can support researchers as well as practitioners in analyzing and designing the elements of blockchain-based markets on an individual and global level. In addi-tion, we go beyond a purely analytical perspective and provide a toolbox to support the active construction of blockchain-based ecosystems and infrastructures. In doing so we pave the way for future research that will help to break down the blockchain hype.
Bitcoin is an online communication protocol that facilitates the use of a virtual currency, including electronic payments. Bitcoin's rules were designed by engineers with no apparent influence from lawyers or regulators. Bitcoin is built on a transaction log that is distributed across a network of participating computers. It includes mechanisms to reward honest participation, to bootstrap acceptance by early adopters, and to guard against concentrations of power. Bitcoin's design allows for irreversible transactions, a prescribed path of money creation over time, and a public transaction history. Anyone can create a Bitcoin account, without charge and without any centralized vetting procedure—or even a requirement to provide a real name. Collectively, these rules yield a system that is understood to be more flexible, more private, and less amenable to regulatory oversight than other forms of payment—though as we discuss, all these benefits face important limits. Bitcoin is of interest to economists as a virtual currency with potential to disrupt existing payment systems and perhaps even monetary systems. This article presents the platform's design principles and properties for a nontechnical audience; reviews its past, present, and future uses; and points out risks and regulatory issues as Bitcoin interacts with the conventional financial system and the real economy.
We analyze adverse selection in the used-car market using a new approach that considers a car as an assemblage of parts, some with symmetric information and others with asymmetric information. Using data from the Consumer Expenditure Survey and Consumer Reports, we examine turnover and repair patterns. We find evidence of adverse selection due to the conditions of the transmission, engine, and, during colder months, air-conditioning; and sorting due to the conditions of the vehicle body and, during warmer months, air-conditioning. Our quantification exercises indicate that adverse selection may have a meaningful effect on trade volume and quality in the secondhand market.
Two paradigms characterize much of the research in the Information Systems discipline: behavioral science and design science. The behavioral-science paradigm seeks to develop and verify theories that explain or predict human or organizational behavior. The design-science paradigm seeks to extend the boundaries of human and organizational capabilities by creating new and innovative artifacts. Both paradigms are foundational to the IS discipline, positioned as it is at the confluence of people, organizations, and technology. Our objective is to describe the performance of design-science research in Information Systems via a concise conceptual framework and clear guidelines for understanding, executing, and evaluating the research. In the design-science paradigm, knowledge and understanding of a problem domain and its solution are achieved in the building and application of the designed artifact. Three recent exemplars in the research literature are used to demonstrate the application of these guidelines. We conclude with an analysis of the challenges of performing high-quality design-science research in the context of the broader IS community.
An examination of the place of exploration in the social sciences
This paper relates quality and uncertainty. The existence of goods of many grades poses interesting and important problems for the theory of markets. On the one hand, the interaction of quality differences and uncertainty may explain important institutions of the labor market. On the other hand, this paper presents a struggling attempt to give structure to the statement: “Business in under-developed countries is difficult”; in particular, a structure is given for determining the economic costs of dishonesty. Additional applications of the theory include comments on the structure of money markets, on the notion of “insurability,” on the liquidity of durables, and on brand-name goods.
Since George A. Akerlof (1970), economists have understood the adverse selection problem that information asymmetries can create in used goods mar-kets. The remarkable growth in online used goods auctions thus poses a puzzle. Part of the solution is that sellers voluntarily disclose their private information on the auction webpage. This defines a precise contract — to deliver the car shown for the closing price — which helps protect the buyer from adverse se-lection. I test this theory using data from eBay Motors, finding that online disclosures are important price determinants; and that disclosure costs impact both the level of disclosure and prices.
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they'll generate the longest chain and outpace attackers. The network itself requires minimal structure. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.
The Internet interface poses a difficulty for buyers in evaluating products online, particularly physical experience and durable goods, such as used cars. This increases buyers' product uncertainty, defined as the buyer's perceived estimate of the variance in product quality based on subjective probabilities about the product's characteristics and whether the product will perform as expected. However, the literature has largely ignored product uncertainty and mostly focused on mitigating buyer's seller uncertainty. To address this void, this study aims to conceptualize the construct of product uncertainty and propose its antecedents and consequences in online auction marketplaces. First, drawing upon the theory of markets with asymmetric information, we propose product uncertainty to be distinct from, yet affected by, seller uncertainty. Second, based on auction pricing theory, we propose that product uncertainty and seller uncertainty negatively affect two key success outcomes of online marketplaces: price premium and transaction activity. Third, following information signaling theory, we propose a set of product information signals to mitigate product uncertainty: (1) online product descriptions (textual, visual, multimedia); (2) third-party product certifications (inspection, history report, warranty); (3) auction posted prices (reserve, starting, buy-it-now); and (4) intrinsic product characteristics (book value and usage). Finally, we propose that the effect of online product descriptions and intrinsic product characteristics on product uncertainty is moderated by seller uncertainty. The proposed model is supported by a unique dataset comprised of a combination of primary (survey) data drawn from 331 buyers who bid upon a used car on eBay Motors, matched with secondary transaction data from the corresponding online auctions. The results distinguish between product and seller uncertainty, show the stronger role of product uncertainty on price premiums and transaction activity compared to seller uncertainty, empirically identify the most influential product information signals, and support the mediating role of product uncertainty. This paper contributes to and has implications for better understanding the nature and role of product uncertainty, identifying mechanisms for mitigating product uncertainty, and demonstrating complementarities between product and seller information signals. The model's generalizability and implications are discussed.
In many studiesin software engineering students are used instead of professionalsoftware developers, although the objective is to draw conclusionsvalid for professional software developers. This paper presentsa study where the difference between the two groups is evaluated.People from the two groups have individually carried out a non-trivialsoftware engineering judgement task involving the assessmentof how ten different factors affect the lead-time of softwaredevelopment projects. It is found that the differences are onlyminor, and it is concluded that software engineering studentsmay be used instead of professional software developers undercertain conditions. These conditions are identified and describedbased on generally accepted criteria for validity evaluationof empirical studies.
Economics Since Akerlof (1970), economists have understood the adverse selection problem that information asymmetries can create in used goods markets. The remarkable growth in online auctions of used goods, where buyers generally purchase sight unseen, therefore poses a puzzle. I argue that part of the solution is that sellers voluntarily disclose their private information to buyers through photos, text and graphics on the auction webpage. In so doing they define a precise contract between buyer and seller — to deliver the car shown — and this helps protect the buyer from adverse selection. Extending previous theoretical work by Jovanovic (1982), I model the impact of contractible disclosure and changes in disclosure costs on performance and adverse selection on online auction platforms. To test this theory, I examine data from eBay Motors. I find first that sellers selectively disclose information; second that this reduces information asymmetry; and finally that disclosure costs impact both the level of disclosure and the prices obtained by sellers, and consequently incentives for seller participation.
This paper presents an empirical investigation of adverse selection in the wholesale used car market. New car dealers (who sell both new and used cars) differ from used car dealers (who sell only used cars) in the propensity to sell trade-ins on the wholesale market. Models of adverse selection suggest that the dealer type that sells a higher proportion of its trade-ins on the wholesale market will sell, on average, cars of higher quality and receive in return a higher price. A survey of dealers' wholesale behavior and prices collected at a wholesale auction are used to test this prediction. Copyright 1993 by University of Chicago Press.
I. Introduction, 599.—II. Sharecropping, 601.—III. Work conditions: the rat race, 603.—IV. Statistical discrimination, 606.—V.
Caste and group organizations, 608.—VI. Conclusions, 617.
I. Introduction, 488. — II. The model with automobiles as an example, 489. — III. Examples and applications, 492. — IV. Counteracting
institutions, 499. — V. Conclusion, 500.
This article revisits Akerlof's (1970) classic adverse-selection market and asks the following question: do greater information asymmetries reduce the gains from trade? Perhaps surprisingly, the answer is no. Better information on the selling side worsens the "buyer's curse," thus lowering demand, but may shift supply as well. Whether trade increases or decreases depends on the relative sizes of these effects. A characterisation is given. On the other hand, improving the buyer's information--i.e., making private information public--unambiguously improves trade so long as market demand is downward sloping. Copyright 2001 by the RAND Corporation.
In the presence of adverse selection, how does the nature of the market equilibrium depend on the convention used to set the prices? Using a variant of Akerlof's model of the used car market, we examine the equilibrium of the model under three distinct conventions: (1) an auctioneer sets the price; (2) buyers set the price; (3) sellers set the price. Only in the case of the auctioneer is the equilibrium necessarily characterized by a single price which equates supply and demand. When either buyers or sellers set the price, a distribution of prices may emerge with excess supply at some or all of the prices. The analysis suggests that the allocation of goods in markets where adverse selection is a serious problem may be sensitive to the convention by which prices are set.
This paper shows that increases in the minimum wage rate can have ambiguous effects on the working hours and welfare of employed workers in competitive labor markets. The reason is that employers may not comply with the minimum wage legislation and instead pay a lower subminimum wage rate. If workers are risk neutral, we prove that working hours and welfare are invariant to the minimum wage rate. If workers are risk averse and imprudent (which is the empirically likely case), then working hours decrease with the minimum wage rate, while their welfare may increase.
Jumping on the Blockchain bandwagon: Lessons of the past and outlook to the future
- M Avital
- R Beck
- J King
- M Rossi
- R Teigland
Avital, M., Beck, R., King, J., Rossi, M., & Teigland, R. (2016). Jumping
on the Blockchain bandwagon: Lessons of the past and outlook to
the future. 37th ICIS Proceedings.