Risk , Convenience , Cost and Online Payment Choice : A Study of eBay Transactions

Online payments are a critical issue in electronic markets. This research investigates online payment choices using probit and nested logit model based on the survey data we collected from eBay users. We develop a theoretical framework to model payment choices between the trader partners based on risk, convenience and cost dimensions. Then, we analyze how product attributes, traders’ characteristics and payment attributes affect the payment choice. Our findings suggest that the cost and inconvenience associated with a payment method discourages its use in online transactions. Product attributes, especially uncertainties associated with the product quality, appear to have stronger effect in affecting payment choices than traders' characteristics. We also find that a seller’s reputation rating does not have a significant effect on actual payment choices, but affects the payment options offered by a seller. J.E.L Code: L14, L86

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