Consumer adoption of group‐buying auctions: an experimental study

Internet‐based group‐buying auctions enable consumers to obtain volume discounts, but they face risk and trust issues that are not present in other e‐retailing formats, which affects their adoption by consumers. Bidders experience uncertainty about the final auction price, and the risk of whether the auction will be completed. We evaluate textual comments and the number of bids made in an auction as drivers of a consumer's perceived financial and psychological risks toward the group‐buying auction mechanism and trust in the auction initiator. We use an Internet‐based experimental test bed for online group‐buying auctions and will report on one experiment that we conducted. Our results indicate that textual comments made by the participants about sellers in past auctions and existing bids affected a consumer's perceived trust in the auction initiator and the financial risk of the mechanism. Positive textual comments and more bids appear to enhance perceived trust in the auction initiator and reduce financial risk, and other consumers are more willing to make bids as a result. Consumers continued to express concerns about the uncertainty of the final group‐buying auction price though.