Buying an item sight unseen on the Internet requires a significant amount of tru
ID: 3178117 • Letter: B
Question
Buying an item sight unseen on the Internet requires a significant amount of trust in the seller. Consider this hypothesis: Potential buyers tend to scrutinize the offers posted by sellers with poor reputations more than they do the offers posted by sellers with neutral or good reputations. As a result, if buyers notice a surcharge (such as a shipping fee) levied by a seller with a poor reputation, they reduce the (presurcharge) price they are willing to pay for the item. On the other hand, a surcharge does not affect buyers' (presurcharge) willingness to pay for an item offered by a seller with a neutral or a good reputation Amar Cheema tested this hypothesis, which was described in a June 2008 paper entitled "Surcharges and Seller Reputation" and published in the Journal of Consumer Research. Cheema collected data on 271 completed eBay auctions for three DVD trilogies: The Godfather, The Lord of the Rings, and Star Wars. For each auction, Cheema recorded the winning bid, the surcharge, and the seller's eBay feedback score. Then he partitioned the 271 auctions into three almost equal-sized samples based on the seller's feedback score. The following is a simple linear regression model estimated for each group a bX where Y winning bid (in dollars) and X shipping cost (in dollars) The following equation lists the estimation results obtained for the sample of 90 medium-reputation sellers: The regression line: 33.04 0.43X sx: 2.0952 SY: 7.14.14 SY 7.15 (Note: These results do not exactly duplicate Cheema's results but are representative of the Cheema study.)Explanation / Answer
The valye of the test statistic is :
t = b1 / S.Ex
= 0.43 / 2.0952
= 0.2052
You Cannot conclude that there is a significant linear relationship between shipping cost and winning bid.
(Because t is not less than -1.662 nor greater than 1.662)
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