Role Preference in Electronic Bargaining 1
Role Preference in Electronic Bargaining Contexts: The Influence of Trust and the Availability
of Market Information
Samuel J Birk
University of Arizona
Role Preference in Electronic Bargaining 2
Role Preference in Electronic Bargaining Contexts: The Influence of Trust and the Availability
of Market Information
With the increased use of e-commerce sites by consumers, bargaining activities are
frequently occurring between anonymous and spatially distal parties. In order to reduce
transaction costs for both consumers and service providers, most of the e-commerce sites that
employ variations of ultimatum bargaining games (e.g., Croson, Boles, & Murnighan, 2003;
Guth, Schmittberger, & Schwarze, 1982; Pillutla & Murnighan, 1995). In an ultimatum
bargaining game, one party (the proposer) makes a single proposal to another party (the
receiver). The receiver then has the option to accept or reject the offer. The acceptance of the
offer results in a completed transaction, while the rejection of an offer results in a failed
transaction (Thaler, 1988).
Although the traditional ultimatum game has been studied extensively, the online format
introduces several novel areas for research. For example, recent research found that participants
interacting with online intermediaries (sites that present the prices from several companies to
consumers, e.g. Priceline.com) in the proposer role paid more for hotels and found the
experience to be less fair than participants in the receiver role (Ellis, Humphrey, Conlon, Tinsley,
2006). This finding contradicts previous research on ultimatum games, which demonstrates that
the proposer typically receives more money (e.g. Guth et al., 1982) and experiences the
distribution of wealth as more fair than the receiver (e.g. Declerck, Kiyonari, Boone, 2009).
Furthermore, a recent study finds consumers interacting with online intermediaries prefer the
receiver role to the proposer role (Conlon, Tinsley, Humphrey, Ellis, & Birk, Unpublished).
Again this finding contradicts robust evidence from research examining preferences in traditional
Role Preference in Electronic Bargaining 3
ultimatum bargaining games, in which, participants prefer to act as the proposer (e.g. Hoffman et
al, 1994).
Despite the increased interest in understanding the effects of online bargaining
experiences, little theoretical or empirical research has provided insight into when and why role
preferences change in these contexts. The extant literature has focused solely on intermediary
sites, ignoring direct-buy sites (i.e. corporation websites that sell the same products as the
intermediary) and has restricted participants’ access to market information. Furthermore, the
extant research has been unable to adequately explain why the role preferences of consumers in
electronic ultimatum bargaining scenarios differ from traditional ultimatum bargaining games. In
order to further examine when and why these role preferences might shift in e-commerce
contexts, I provide conceptual arguments using a trust framework, and propose an empirical
study to examine these predictions.
The Role of Trust
Trust is an important component of any bargaining situation. This is especially true in
online bargaining contexts in which anonymity, distal proximity, and underdeveloped legal
precedent make it difficult for actors to enforce fairness and discourage opportunism of other
parties. In these types of situations, trust becomes particularly important for the successful
completion of economic transactions. Furthermore, trust in the other party is likely to influence
role preferences. Trust is defined here as the perceived ability, integrity, and benevolence of a
target of trust (c.f. Doney, Cannon, 1997; Ganesan 1994; Kumar, Scheer, and Steenkamp 1995).
I will focus on the ability and benevolence components of trust, as the integrity component is
tangential to the purposes of this paper. I argue that when consumers perceive that the online
service is both capable and benevolent, the consumer prefers the receiver role over the proposer
Role Preference in Electronic Bargaining 4
role. Specifically, when consumers perceive the site to be competent and knowledgeable,
consumers are more likely to believe that the online site can find the best price for them. Further,
if the consumer believes that the site is benevolent (i.e. has the consumers best interest at heart),
the consumer is more likely to believe that the online site will share the best price with the
consumer. Therefore, when the consumer believes that the site is both capable and benevolent,
the consumer can avoid the costs associated with determining the best price on their own. In turn,
the more the consumer trusts the site the more s/he will prefer to defer to the e-commerce site.
Hypothesis 1: When consumers perceive that the e-commerce site is both capable and
benevolent in regard to the transaction, consumers will prefer to defer to the e-commerce
site and prefer the receiver role.
In the next sections, I propose contexts in which the recent findings related to role
preference in electronic ultimatum bargaining contexts might be reversed. Furthermore, the
following sections provide conceptual arguments using a trust framework to predict role
preference.
Trust in Intermediaries vs. Direct Buy Sites
In e-commerce contexts, user perceptions of the online services' ability are based on “two
related beliefs: (1) whether the firm is competent (expert or skilled) enough to perform the
intended behavior, and (2) whether the firm has access to the knowledge required to perform the
behavior appropriately” (p. 217, Bhattacherjee, 2002). Intermediaries make it known that they
have data from several if not, most or all, of the currently available e-commerce sites in the
industry. For example, Priceline.com has a database of current prices from Southwest, Delta,
American Airlines, and several more. In other words, intermediaries have access to the
knowledge required to perform a search for the best price of an airline ticket or hotel room.
Role Preference in Electronic Bargaining 5
Direct-buy sites, however, only access a database that contains prices for that particular airline,
or potentially airlines owned by a single corporation. Therefore, the intermediary sites have more
“knowledge” about the best available price than direct-buy sites. In turn, the intermediary is
likely perceived to be more able than any direct-buy site.
Furthermore, intermediaries are likely to be perceived as more benevolent than direct-buy
sites for at least two reasons. First, intermediaries by their very nature seem to have no allegiance
to any particular direct buy site. Second, the economic interest of the intermediary is in-line with
that of the consumer. The intermediary’s economic objective is to find the best price possible in
the shortest amount of time. In return for this service the intermediary receives a referral fee. The
direct-buy site, however, is only interested in making the largest profit on each sale. In turn,
consumers likely perceive intermediaries as more benevolent than direct buy sites.
Hypothesis 2: Consumers trust intermediaries more than direct-buy sites leading to a
stronger preference to act as the proposer when interacting with direct buy sites and as
the receiver when interacting with intermediaries.
The Market
Another potential influence on the consumer’s role preferences is the amount of market
information that is easily accessible. In previous research, the participants were limited in terms
of the amount of market information made available to them (Conlon et al., Unpublished; Ellis et
al., 2006). Nonetheless, for the reasons stated earlier the availability of market information is
unlikely to have a large impact on role preference when the consumer trusts the e-commerce site.
Specifically, the consumer’s trust allows him or her to avoid the costs of searching for the lowest
price. In turn, consumer’s who trust the service provider should defer to the service provider and
ignore or pay little attention to market information. On the other hand, consumers who do not
Role Preference in Electronic Bargaining 6
trust the service provider should seek out market information. Confident about the price of the
product and distrustful that the service provider will give them the lowest price, these consumers
are more likely to prefer the proposer role than (1) consumers who trust the site or (2) consumers
who distrust the site but do not have access to market information.
Hypothesis 3: The amount of market information available to the consumer will moderate
the effect of trust on role preference, such that the influence of trust on role preference
will be stronger when market information is available.
Method
Participants will be 200 undergraduate students. The study will employ a 2 (Type of Site:
Intermediary Vs Direct Buy) X 2 (Amount of Market Information: No Market Info Vs Market
Info). All participants will be randomly assigned to condition. The study will employ procedures
similar to those used by Conlon et al. (Unpublished). Specifically, participants will be told that
they are to assume the role of an individual interested in purchasing a hotel room for a trip to
Miami, FL. Participants will then either be directed to a direct buy site, which they will be told is
being marketed by Hilton (Direct Buy condition) or to an intermediary site they are told is being
marketed by Priceline.com (Intermediary Condition). Participants will then either be directed to a
site to purchase the hotel (No Market Info condition) or will be given the opportunity to see the
price of 10 four-star hotels in the Miami area (Market Info condition). The amount of time spent
examining the price of the 10 four-star hotels will be recorded. Participants will then be
instructed that they can either propose a price to the site, or the site can propose a price to them.
They will also be instructed that if the offer is not accepted, the transaction will not be completed
and they will be unable to get a hotel room in Miami. The dependent variable is whether the
participants choose to act as a proposer or as a receiver.
Role Preference in Electronic Bargaining 7
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