When AI Gets It Wrong: Hallucinations and Trust Recalibration in E-Commerce Using a Sequential Mixed-Methods Approach

Abstract

Generative AI shopping assistants are becoming a primary touchpoint for online consumers, yet they often produce convincing but inaccurate content, a phenomenon known as AI hallucination that poses an under-studied risk to consumer trust in e-commerce. This study explains that phenomenon by building and testing a moderated mediation model grounded in Expectation Violation Theory, Epistemic Vigilance Theory, and Algorithmic Trust Repair Theory. A sequential, exploratory mixed-methods design was used: a qualitative phase identified the dimensions and configurational pathways of consumer trust withdrawal using the Gioia methodology and fuzzy-set Qualitative Comparative Analysis, and a subsequent large-scale quantitative phase tested and refined the resulting model across a multi-country European sample using partial least squares structural equation modeling and Necessary Condition Analysis. The results show that exposure to hallucinations triggers expectation violation, activating epistemic vigilance and reducing perceived AI competence; this sequence drives trust recalibration, reflected in lower continued-use and purchase intentions and greater negative word-of-mouth. AI literacy, prior trust, and transparency cues significantly moderate these relationships, and structural trust repair mechanisms, namely retrieval-augmented generation and uncertainty disclosure, prove more effective than purely communicative repair strategies. Theoretically, this study advances a dynamic account of trust recalibration in AI-mediated commerce; practically, it offers concrete guidance for platform design and regulatory policy under the EU AI Act.