The power of emotions in online decision making: A study of seller reputation using fMRI

Online auctions use a variety of unique tools to provide quality signals for products and sellers in an attempt to overcome the online marketplace's limitations. These tools include feedback ratings and symbols that indicate reputation. However, surprisingly few studies have investigated the effects of reputation indicators in the decision-making process in online marketplaces. No prior study in our knowledge has examined the role of graphics indicators in online decision-making. We investigated the decision process and the price premium an individual was willing to pay for a product using an experiment with the Becker-DeGroot-Marschak procedure and event-related measures of brain activity. As signaling theory expects, results showed that the price premium paid for a product was higher when the product sold by a seller appeared with a high-reputation symbol. High-reputation seller indicators triggered significantly higher neural activity compared with low-reputation seller indicators in brain regions associated with emotions in the prefrontal cortex (the ventromedial prefrontal cortex). The degree of integrated cognitive value and cognitive and emotional value as represented by neural activity in the dorsolateral prefrontal cortex and VMPFC respectively was correlated with the price premium individuals bid for products. The results indicate the applicability of semeiotic theory along with signaling theory in the e-marketplace context and suggest fruitful avenues for further research.