Expert Opinion and the Demand for Experience Goods: An Experimental Approach

James Hilger, Greg Rafert and Sofia Villas-Boas ()
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James Hilger: Bureau of Economics, Federal Trade Commission
Greg Rafert: University of California, Berkeley

No 1049, Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: There exist two significant obstacles to analyzing the effect of expert opinion on consumer demand for experience goods: (1) the relationship between good reviews and high product demand may be spurious and driven by high product quality, and (2) even if expert opinion increases consumer demand, it is unclear whether it does so by providing quality information or by alerting consumers to the existence of a particular product. We utilize an experimental approach in a retail grocery chain in which we display expert opinion information for a group of randomly selected wines to overcome these obstacles. We find that although there is no overall consumer response to expert opinion provision, a subset of highly reviewed wines experienced an increase in demand. Results indicate that consumers utilize quality information provided by expert opinion labels, as opposed to solely using the label to learn of a wine's existence.

Date: 2007-10-16
Note: oai:cdlib1:are_ucb-1186
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