Research Of The Adverse Selection Problem Under The On-line Shopping Environment

Online shopping is a new trading pattern and trading channel of the development of Internet. Onlineshopping changed the way of people shopping and pulled the economic growth. The virtual feature ofnetwork break the limit of time and space and strengthen trust deficiency and the information asymmetryaggravated the problem of adverse selection. The adverse selection in online shopping result in high-qualitygoods lose competitiveness and be eliminated by inferior goods.Firstly analyzed the characteristics of online shopping environment, and found the problem duringshopping. By analyzing online shopping behavior feature, we found the factors that affect the consumersmaking purchasing decisions. Making model assumptions according to the feature of online trading process,by simulating the game of the trading parties, we use information economics theory to analyze the factorsthat influence the adverse selection in online shopping environment. Put forward some adverse selectionrisk circumvention mechanism, such as signaling model, reputation mechanisms and information screening.The study found transmitting quality information can weaken the case of asymmetric information and whenthere are enough times of gaming there will be cooperation between the two trading parties. Finally putforward some specific strategies according to the adverse selection problem in online market.Take the trading data of skin care products from Taobao as study sample, collecting、collating andanalyzing the data. The analysis result verified that due to the information asymmetry in the online market,there is a lower share of high-quality goods, they lose market gradually; the transmitting of quality signalcan weaken the adverse selection of goods from a certain degree.This paper verified the adverse selection problem in the online market by using the data from Taobao.The solution for the adverse selection in the online market also has guiding significance.