The Role of Legitimacy and Reputation Judgments in Users’ Selection of Service Providers on Sharing Economy Platforms
Sharing economy platforms provide an array of information, mostly consisting of service provider profiles, ratings, and detailed reviews of past users, to accompany users in their selection task. A recent study by Yann Truong, of ESSCA, Claire-Lise Ackermann of Rennes School of Business, and Richard Klink, of Loyola University, Maryland, show that providing too much information, or type of information that is not adapted to the level of economic stakes involved in the service, may be detrimental to optimal decision making.
Reputation versus legitimacy
In Information Systems literature, reputation reflects all that is said about a person or one’s past actions within a community, and is the main lens through which a community member’s trustworthiness is evaluated. However, the social judgment literature suggests that reputation is not the sole judgment form that people use to evaluate the trustworthiness of another individual or entity. Organizational scholars have identified another important form of social judgment: legitimacy. Legitimacy is a generalized perception of organizational actions as desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and definitions. Distinguishing between reputation and legitimacy is critical because reputation judgment evaluates a partner at the individual level (is this partner reliable?) while legitimacy judgment evaluates a partner at the category level (is this partner appropriate?). Therefore, these two forms of social judgment involve different levels of cognitive effort and processes.
The nature of the question the evaluator aims to answer regarding the focal entity dictates the selection of the form of judgment: the goal of the evaluator determines the form of judgment which, in turn, determines the information to be used to form the judgment. Furthermore, the level of motivation generated by the need to make the “right” judgment has an important effect on the intensity of the cognitive efforts that the evaluator will dedicate to the judgment.
Therefore, evaluators are likely to use legitimacy judgments when economic stakes are low because the impact of a “wrong” choice is minimal; conversely, they are likely to use reputation judgments when economic stakes are high as they are ready to expend greater efforts on due diligence, to avoid the consequences associated with a “wrong” choice.
AIRBNB as a field of investigation
Our study investigated users’ selection process of service providers on sharing economy platforms, and used Airbnb as a setting. We applied social judgments to explain when users are more likely to resort to legitimacy or reputation judgment to select service providers. Social judgment literature suggests that the level of stake determines the form of judgment users employ.
Thus, social judgment literature predicts that users should form legitimacy judgment in low-stake transactions, whereas, for high-stake transactions, they should be more likely to use reputation judgment. However, a first qualitative study revealed that users rely on reviews for host selection regardless of the level of stake.
This intriguing finding may be explained by the facilitated access to reviews on the platform. As all users have access to reviews for all rentals, they expend little or no effort in searching for reputational information cues.
All AIRBNB users rely on reviews when selecting a host because they are available…
In experiment 1, we further investigated the findings of the qualitative study and found that users read reviews in both low-stake and high-stake trips. Nonetheless, while users perceive reviews to be useful in both low- and high-stake trips, the order of information access vary: Users rely more on profile cues and aggregated ratings scores in low-stake trips, while reviews are prioritized in high-stake trips.
… But reviews may lead to suboptimal decisions when the level of stakes involved in the stay is low
We conducted a second experiment to study the usefulness of reviews in low-stake trips. We showed that users tend to make more optimal purchase decisions for low-stake trips when the reviews are not accessible. This result points to a potential state of information overload when the platform shows all types of information, including reviews, to users evaluating low-stake trips. Overall, our studies support the view that legitimacy judgment is best suited to users’ selection task for low-stake trips while reputation judgment is more appropriate for high-stake trips.)
So less is sometimes better!
Methodology
We employ a mixed-method approach to strike a balance between the exploratory phase and the confirmatory phase. The first phase used a combination of qualitative and quantitative methods to explore how users form both judgment of legitimacy and of reputation in their evaluation of hosts and what information cues they use for each judgment form. The second phase consisted of two online experiments to examine the role of stake in influencing users’ selection of a judgment form. The unit of analysis here is individual members on sharing platforms (i.e., hosts and guests on Airbnb).
Applications and beneficiaries:
Our results challenge the common view that users must have access to all information about other users on online marketplaces, and thus similar information should be provided to users independently of their motivations in the transaction. Current practices on most sharing economy platforms lean toward providing all available information on service providers to inform decision-making. However, while users tend to read detailed information for all their transactions, this intensive process may be counter-productive, as the amount and level of information exceed their actual needs, and more generally contradicts the principle of cognitive economy which states that users tend to make decisions with minimal cognitive effort. Our findings indicate that users make more efficient decisions when the amount and level of information are adapted to the stake of the transaction. We acknowledge that it is unlikely that platforms hide information to users, and thus, suggest that the different types of information (profiles, ratings, and reviews) are presented in a stepwise manner to help users evaluate hosts and make decisions. We assume that such a system allows users to adapt information depth according to the transaction stake.
Reference to the research
Truong, Y., Ackermann, C.-L., and Klink, R. (2021) The Role of Legitimacy and Reputation Judgments in Users’ Selection of Service Providers on Sharing Economy Platforms. Information & Management 58: 103529.
