Self-Selection and Information Role of Online Product Reviews.

Author List: Li, Xinxin; Hitt, Lorin M.;
Information Systems Research, 2008, Volume 19, Issue 4, Page 456-474.
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.
Keywords: consumer heterogeneity; herding; online product reviews; self-selection
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#199 0.283 reviews product online review products wom consumers consumer ratings sales word-of-mouth impact reviewers word using effect marketing helpfulness electronic commerce
#5 0.138 consumer consumers model optimal welfare price market pricing equilibrium surplus different higher results strategy quality cost lower competition firm paper
#262 0.116 impact data effect set propensity potential unique increase matching use selection score results self-selection heterogeneity evidence measure associated estimate leads
#89 0.104 product products quality used characteristics examines role provide goods customization provides offer core sell key potential stronger insights design initial
#62 0.067 price buyers sellers pricing market prices seller offer goods profits buyer two-sided preferences purchase intermediary traditional marketplace decisions intermediaries selling
#137 0.057 phase study analysis business early large types phases support provided development practice effectively genres associated different sensemaking including form technologies