ENHANCING INFORMATION TRANSPARENCY OF ONLINE USED CAR TRANSACTIONS THROUGH VIRTUAL REALITY IN A COMPETITIVE MARKET

Compared with offline used car transactions, in which consumers can physically inspect a vehicle, online markets lack real-world experience, leading to greater information asymmetry. This asymmetry affects purchasing decisions and transaction efficiency. Emerging virtual reality (VR) technology offers a solution for reducing information asymmetry by enhancing consumers’ perceived information and shopping experiences, helping them find a used car that better meets their actual needs. We propose a model of the online used car market featuring one offline dealer and two competing trading platforms to evaluate the value of VR experience services in online used car resale. VR could increase transaction volume and profits by improving the consumer shopping experience and convenience. Specifically, if consumers perceive higher quality expectations and greater convenience from VR services, platforms will proactively offer VR experience services. Platforms that have previously adopted VR technology gain additional benefits. In the differentiated competition scenario, the total transaction volume of used cars in the online market is maximized. If all platforms adopt VR, the total transaction volume and profits may decline compared to a differentiated competition scenario, they will still be higher than in a market where no platform uses VR technology. Our research provides insights into how VR can drive growth in the online used car market.