Article | Proceedings of the International Conference on Electronic Commerce | 2009

Adverse Selection in Online 'Trust' Certifications

by Benjamin Edelman

Abstract

Widely used online "trust" authorities issue certifications without substantial verification of recipients' actual trustworthiness. This lax approach gives rise to adverse selection: the sites that seek and obtain trust certifications are actually less trustworthy than others. Using a new dataset on web site safety, I demonstrate that sites certified by the best-known authority, TRUSTe, are more than twice as likely to be untrustworthy as uncertified sites. This difference remains statistically and economically significant when restricted to "complex" commercial sites. In contrast, competing certification system BBBOnline imposes somewhat stricter requirements and appears to provide a certification of positive, albeit limited, value.

Keywords: Online Technology; Web Sites; Trust; Governance Compliance; Value; Complexity;

Citation:

Edelman, Benjamin. "Adverse Selection in Online 'Trust' Certifications." Proceedings of the International Conference on Electronic Commerce (2009): 205–212. (ACM International Conference Proceeding Series.)