Self-Selection and Information Role of Online Product Reviews

Online product reviews may be subject to self-selection biases that impact consumer purchase behavior, online ratings' time series, and consumer surplus. This occurs if early buyers hold different preferences than do later consumers about the quality of a given product. Readers of early product...

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Bibliographic Details
Published inInformation systems research Vol. 19; no. 4; pp. 456 - 474
Main Authors Li, Xinxin, Hitt, Lorin M
Format Journal Article
LanguageEnglish
Published Linthicum INFORMS 01.12.2008
The Institute for Operations Research and the Management Sciences (INFORMS)
Institute for Operations Research and the Management Sciences
Subjects
Analysis
Bestselling books
Bias
Consumer behavior
consumer heterogeneity
Consumer research
Consumerism
Consumers
Decision-making
Direct sales
herding
Information storage and retrieval systems
Internet resources
Literature
Market strategy
online product reviews
Product choice
Product reviews
Retail trade
Sales growth
self-selection
Studies
Sumer
The Interplay Between Digital and Social Networks
United States
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Summary:Online product reviews may be subject to self-selection biases that impact consumer purchase behavior, online ratings' time series, and consumer surplus. This occurs if early buyers hold different preferences than do later consumers about the quality of a given product. Readers of early product reviews may not successfully correct for these preference differences when interpreting ratings and making purchases. In this study, we develop a model that examines how idiosyncratic preferences of early buyers can affect long-term consumer purchase behavior as well as the social welfare created by review systems. Our model provides an explanation for the structure of product ratings over time, which we empirically test using online book reviews posted on Amazon.com. Our analysis suggests that firms could benefit from altering their marketing strategies such as pricing, advertising, or product design to encourage consumers likely to yield positive reports to self-select into the market early and generate positive word-of-mouth for new products. On the other hand, self-selection bias, if not corrected, decreases consumer surplus.
Bibliography:SourceType-Scholarly Journals-1
ObjectType-Feature-1
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ISSN:1047-7047
1526-5536
DOI:10.1287/isre.1070.0154