Herding behavior in C2C e-commerce: Empirical investigation in China

The objective of this study is to identify the phenomenon of herding behavior in customers´ online purchasing decision. We attempt to explore the effect of historical transaction volume, ratings and price premium on the customers´ purchasing decision and their final transaction volume. Based on the panel data collected from Taobao, the largest C2C e-Commerce website in China, linear regression analysis was performed to test the significance of the effects. This study revealed that historical transaction volume, positive ratings and neutral ratings had a significant positive effect on the consumer online purchasing decision, but negative ratings and price premium with a negative effect. We also applied entropy theory to validate the existence of herding behavior from the perspective of information theory, and with a salient result.