Journal
ELECTRONIC COMMERCE RESEARCH AND APPLICATIONS
Volume 10, Issue 1, Pages 17-25Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.elerap.2010.06.001
Keywords
Adverse selection; Certification; Reputation; Trust; Regulation
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Widely-used online trust authorities issue certifications without substantial verification of recipients' actual trustworthiness. This lax approach gives rise to adverse selection: the sites that seek and obtain trust certifications are actually less trustworthy than others. Using an original dataset on web site safety, I demonstrate that sites certified by the best-known authority, TRUSTe, are more than twice as likely to be untrustworthy as uncertified sites. This difference remains statistically and economically significant when restricted to complex commercial sites. Meanwhile, search engines create an implied endorsement in their selection of ads for display, but I show that search engine advertisements tend to be less safe than the corresponding organic listings. (C) 2010 Elsevier B.V. All rights reserved.
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