Trust and trade: A cautionary tale of introducing social relations to support transactions

The lack of trust between buyers and sellers is considered a major barrier to online business. This study explores whether providing social relation information between buyers and sellers can facilitate their transactions in an otherwise largely anonymous online market. We exploit an opportunity to conduct a field experiment on a large Chinese online second-hand platform, in which we randomly select a group of users to provide them with their social relation information. We find that the transaction rate increases if the buyer and seller become aware that they share common friends with each other, but the effect of revealing a direct friendship relation between them on transactions turns out to be overwhelmingly negative. We propose that there are boundaries over social relation’s support for transactions, beyond which the revelation of social relation information could impede transactions.