The world of online commerce is endlessly fascinating to Sulin Ba, an associate professor of information systems in the School of Business. Her research has explored how retailers provide online services, build brand recognition, and set prices online, and how sellers on eBay develop trust among their customers.

One of her most intriguing subjects may be the virtual marketplace that takes place in Second Life, a virtual society started in 2003 that allows users to create 3-D avatars who lead lives that include buying, selling, and trading virtual property.

Virtual Trading

Curious about this world a few years ago, Ba created an avatar for herself and marveled at the people who put up real U.S. dollars, converted them to “Linden dollars,” and bought virtual property, houses, jewelry, jeans, and furniture to embellish their virtual world.

“It is so fascinating,” she says. “You have people spending money to buy a chair, for example, and it’s not a chair you can really sit on.”

Ba, a native of Kaifeng, China who joined UConn’s Department of Operations and Information Management in 2002, began studying “X Street,” the Second Life marketplace, to see what forces were at work in the virtual store.

“I needed to understand what this world is all about,” she says. “It’s quite a vibrant marketplace.”

Ba and collaborators Jan Stallaert, Zhongju “John” Zhang, and Dan Ke focused their research on different types of permission rights that Second Life sellers grant their customers when peddling virtual goods. They might, for instance, agree to sell someone a chair they have designed and not let it be copied, she says. Or they may give permission for a buyer to buy the chair and change its color in the virtual world. There’s another level of permission that grants the buyer the right to share the chair’s design with other avatars.

The researchers presented a paper titled, “Why Give Something for Nothing When You Can Charge? Investigating Virtual Goods Pricing and Permission Strategies,” at a conference in Paris last year. It was well received, Ba says. The paper is now under review for publication in a prestigious academic journal.

Ba, an associate professor of information systems, earned a master’s degree and doctorate from the University of Texas at Austin. From 1996 to 2002, she was an assistant professor at the University of Southern California.

Last spring, she was on a sabbatical from UConn and was a visiting professor at Fudan University in Shanghai, China. She received a two-year grant from the National Natural Science Foundation in China to conduct research into how Chinese culture affects trust building in online business.

Building Trust Online

Ba says she was one of the first U.S. researchers to study online trust and reputations in e-commerce. In 1999, her work on how small businesses can build trust among online customers became the basis of testimony before the Congressional House Committee on Small Business.

Ba then turned her attention to the auction site, eBay. In 2002, she and former student Paul Pavlou published research showing that eBay’s feedback system – in which buyers rate their experience with eBay sellers – was an effective way to build trust and reputation.

“We found that sellers with a good reputation and positive feedback on eBay can generate more trust, and that buyers are willing to pay more for their products,” she says. “It seems so intuitive now, but back then, it was a big unknown. Our research is frequently cited.”

Ba, Stallaert, and Zhang, who are also faculty members in UConn’s operations and information management department, were honored earlier this year by the School of Business with its Best Paper Award. The paper, “Online Price Dispersion: A Game Theoretic Perspective and Empirical Evidence,” has been accepted for publication in the prestigious Information Systems Research journal, says Professor Ram Gopal, head of the operations and information management department.

Ba also received the Undergraduate Teaching Award from the business school in 2008 and its Teaching Innovation Award in 2007.

“Sulin is one of our senior scholars. She’s a very accomplished person, and is doing excellent work in her field,’’ Gopal says.

In the price dispersion paper, Ba, Stallaert, and Zhang show that the level of service a company provides and its brand recognition play a prominent role in the prices that can be set for goods, Gopal says.

“Their research has strong implications for businesses,” Gopal says. “What they have come up with is groundbreaking.”

Using game theory, an economic method used to understand behavior, the team of researchers found a “theoretically sound explanation” for a “very puzzling phenomenon,” Ba says, namely why some less-known online companies might not be able to charge higher prices when they improve their online customer service in contrast to companies with a better-known brand.

“This is a better model that might help businesses,” Ba says, “because online competition is so fierce.”