Online deals trip you into risky decisions

November 2nd, 2011 - 2:33 pm ICT by IANS  

Facebook Washington, Nov 2 (IANS) Interacting with websites involved in lending and auctions can trip you into taking risky financial decisions, an Indian origin researcher says.

“Emerging evidence indicates that online community participation impacts many aspects of consumer behaviour, and our findings reveal that this impact extends to financial decision-making,” said study author Utpal Dholakia, professor of management at Rice University.

In a field experiment involving more than 13,000 eBay customers over a two-year period, those who joined the online community engaged in riskier bidding behaviours by placing more bids on each item and spending more for items they won.

Such participants tend to believe that the community will support them in difficult situations. This perception causes them to make riskier financial decisions, the Journal of Marketing Research reports.

The more active the participants are within the online community, the riskier their financial decisions tend to be.

“These communities are different from social networking sites like Facebook, because the individuals involved are usually strangers whose identities are unknown to the consumer,” said Dhokalia, according to a statement from the university.

Dholakia likened it to individuals who join an online support group run by a hospital, foundation or advocacy group or members of an online adolescent club.

“This may lead to patients choosing riskier treatment options or engaging in high-risk behaviours, some of which could prove detrimental,” he said.

“If, for example, members of a discount brokerage firm’s online community invest more aggressively by buying riskier stocks that perform worse than market averages, this would affect them adversely and also hurt the firm’s standing and brand name,” Dholakia stated.

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