Multi-Party Certification on Blockchain and Its Impact in the Market for Lemons
Journal
Journal of Management of Management Information Systems
Type
journal article
Date Issued
2022-06-07
Author(s)
Abstract
Markets in which similar goods of different qualities are sold suffer from information asymmetries and their negative consequences. Dealers have established themselves, and mediate these markets through their use of quality signals. While these signals help to miti-gate information asymmetries, these markets still function well below their optimum: a large share of goods sold are overpriced, and most of the benefits are reaped by intermediaries. In this paper we build on prior research that proposes the use of blockchain as an enabler for trusted, decentralized asset documentation. Applying a socio- technical lens, we describe how blockchain-enabled multi-party certi-fication affords dealers the action potential to send signals that are more closely correlated to the unobservable quality of the underlying good (i.e., signals with a higher fit) than the signals they send today. We then both theorize and experimentally explore the market effects of the two types of signals. Using data from a laboratory market experiment with 210 participants, we find empirical evidence that multi-party certification affords dealers the action potential to send signals of significantly higher fit than those sent by intermediaries alone, leading to a reduction in information asymmetries, a more efficient allocation of goods, and an increase in market fairness.
Language
English
Keywords
Blockchain
Information Asymmetry
Market for Lemons
Online Signaling
Multi-party Certification
Market Mechanism
Volume
39
Number
2
Start page
395
End page
425
Division(s)
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Name
Multi-Party Certification on Blockchain and Its Impact in the Market for Lemons.pdf
Size
3.93 MB
Format
Adobe PDF
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