EBAY OR CRAIGSLIST?: EXPLAINING USERS CHOICE OF ONLINE TRANSACTION COMMUNITY

Abstract

In this paper we examine users’ rationale for choosing a particular online transaction community. Based on transaction cost economics (TCE), we hypothesize that transaction costs affect users’ choice. We compare different institutional mechanisms ‐ eBay’s identity recognition and reputation system vs. Craigslist’s face-to-face item-forcash local transaction. We also identify other factors related to transaction costs. According to resource-based view (RBV) theory, the size of potential target audience of an online transaction community matters and it influences the chance of making a sale. We conduct exploratory empirical case studies. The findings support both TCE and RBV analyses. Moreover, we discover some interesting new insights that are not part of the original theoretical analyses. One of the potential contributions of this study is that it extends our understanding of users’ choice of different types of online transaction community. This research also has practical implications for online transaction communities.