Page 274 - Trust in ICT 2017

5 Trust in ICT

Figure III.9 – Risk, uncertainty and motivation in used car transactions

Transaction A describes a situation that a dealer purchases a used vehicle from a seller. In this transaction a
dealer is a risk taker. A dealer should investigate the car carefully to assess the condition of the car and
evaluate the price because a dealer cannot confirm a seller’s explanation about the car. Specifically, a seller
does not have a strong motivation of disclosing all information about the car because this information directly
influences the price (Case 1). It is also plausible to assume that a seller is not aware of the exact condition of
the car because symptoms of trouble has not yet clearly shown (Case 2). Thus, a deal should investigate the
car. However, this cross-sectional investigation is not enough to understand the real condition of the car.
Thus, intense disputes commonly occurs after a transaction.
Transaction B describes the situation of that a buyer purchases a dealer the used car. In this transaction, a
buyer is a risk taker. Similar to transaction A, a buyer cannot trust in a dealer (seller) because a dealer has a
strong motivation of hiding the exact information about current condition of the car (Case 1). Although a
dealer detects the critical problems of the used vehicle after transaction A finished, a dealer will not intend
to unveil the detected the problems (Case 2) because this transaction accounts for dealer’s income. As a
result, a dealer – a risk taker in transaction A – sells defective used cars deliberately
partly with intention, partly by accident.
As a result, each entity participating in these transactions have conflicting motivations of unveiling
information on the condition of a used vehicle, so motivations cannot be aligned without an external
intervention. Because of this confliction, “trust” cannot be guaranteed in used vehicle transaction. Although
a seller and buyer need a mediating entity – a dealer – to reduce transaction cost, the problem is that a dealer
is a buyer in transaction A and also a seller in transaction B. Here, transaction cost refers to a cost incurred
in making an economic exchange. In addition, a dealer always tries to make used car transactions for his or
her revenue.

Figure III.10 – Problems of the current used car transaction service

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