Abstract

This article presents an evaluation approach for alternative electronic market designs and examines the impact of introducing an IT-enabled innovation (a social communication tool to support group coordination) in an online group-buying market in terms of group decision-making and economic performance. Drawing on theory from economics, decision theory, and information systems, we present a competitive arousal model for a social buying setting that posits that introducing competitive arousal among buyers reduces buyer profits and that social facilitation can mitigate these costs through better task completion and time to completion rates. Using an economic experiment, we found that rivalry has a negative effect on buyer profits but also that pressure increases the efficiency of social communication in terms of group formation. We discuss the implications of these results.

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