I just finished reading Carrie’s blog post The Prisoner’s Dilemma & eBay. In the post, Carrie gives a great explanation of the prisoner’s dilemma, so I won’t rehash that here. However, what piqued my interest was the idea that, given the prisoner’s dilemma, online transactions shouldn’t be taking place. Nobody should be willing to give over their credit card without first securing the goods they mean to purchase. In the traditional retail sense, you take your goods to the counter and then hand over your payment, which is why the transaction is easy and acceptable. Online, you see a picture of what you want, pay, and hope that it arrives at your door step (or is there when you go to pick it up).
Carrie gives a great explanation of why a service like eBay continues to thrive: trust. I was thinking about how it came to be in the first place. This also has to do with trust but I think that there’s a bit more to it than that.
I think the answer can be found in two places. First, many of the foundational aspects of networking come into play online, whereas they don’t necessarily in real life. In Understanding Social Networks, our best friend Charles Kadushin (2012) explains how homophily and propinquity play a large part in forming the networks that tie us together (p. 18-19). We have also learned that the more likely I am to have a certain trait or desire, the more likely it is that the people with whom I am networking will also share that trait or desire.
So what happens if I decide to create a company that sells goods online? Chances are, I’m going to build that service and test it out. I’ll probably involve my friends and family or some close co-workers to help me out. Because we already share some of the same likes and dislikes, we will probably continue to get closer to each other through the act of sharing the same desire to improve on the service. Likewise, when it’s time to present that idea publicly, I’ll probably serve it up to a small population who also shares the same feelings or has the same outlook on whether it’s a good idea to use the service or not. We would start as a small group, with shared interests and a common sense of trust.
Second, this group of like-minded people probably share a desire to see the endeavour succeed, because that means that their endeavours are equally likely to succeed, should they adopt the same model. It is this combination of cooperation and shared experience that gets many traditional businesses off the ground, but is much more apparent in online circles. Once the foundation has been built, that trust can radiate out from the centre in order to sustain the business.
What do you think? Has this model really changed all that much for these online retailers?
Kadushin, C. (2012). Understanding social networks : Theories, concepts, and findings. New York: Oxford University Press