Abstract
This study investigates the consequences of different legal systems for fraudulent transactions in electronic commerce (ecommerce) or online payment. When a fraudulent online transaction occurs and the online customer disputes the transaction, in many European countries, the online customer takes responsibility for the proof of her or his argument, whereas in the United States, the burden of proof lies with the firm. This paper analyzes corollaries of the two different legal systems and discusses why different regulations exist from the perspective of e-commerce laws. We found that, in a market or society where the elasticity for security investment is relatively high, the legal system that imposes the burdens of proof on firms results in Pareto superior and e-commerce firms achieve higher profitability in equilibrium than the legal system that burdens the onus on customers. In addition, we found that, in some range of the elasticity for security investment, return of the security investment of firms in the first legal system is higher than that in the other legal system in the equilibrium.
Recommended Citation
Chun, Se-Hak; Cho, Wooje; and Kim, Jae-Cheol, "The Burden of Proof in Fraudulent Transactions and Optimal Investment in Information Security" (2006). AMCIS 2009 Proceedings. 611.
https://aisel.aisnet.org/amcis2009/611