Modeling Consumer Learning from Online Product Reviews

Yi Zhao (), Sha Yang (), Vishal Narayan () and Ying Zhao ()
Additional contact information
Yi Zhao: J. Mack Robinson College of Business, Georgia State University, Atlanta, Georgia 30303
Sha Yang: Marshall School of Business, University of Southern California, Los Angeles, California 90089
Vishal Narayan: Samuel Curtis Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853
Ying Zhao: Hong Kong University of Science and Technology, Clearwater Bay, Kowloon, Hong Kong

Marketing Science, 2013, vol. 32, issue 1, 153-169

Abstract: We propose a structural model to study the effect of online product reviews on consumer purchases of experiential products. Such purchases are characterized by limited repeat purchase behavior of the same product item (such as a book title) but significant past usage experience with other products of the same type (such as books of the same genre). To cope with the uncertainty in quality of the product item, we posit that consumers may learn from their experience with the same type of product and others' experiences with the product item. We model the review credibility as the precision with which product reviews reflect the consumer's own product evaluation. The higher the precision, the more credible the information obtained from product reviews for the consumer, and the larger the effect of reviews on the consumer's choice probabilities. We extend the Bayesian learning framework to model consumer learning on both product quality and review credibility. We apply the model to a panel data set of 1,919 book purchases by 243 consumers. We find that consumers learn more from online reviews of book titles than from their own experience with other books of the same genre. In the counterfactual analysis, we illustrate the profit impact of product reviews and how it varies with the number of reviews. We also study the phenomenon of fake reviews. We find that fake reviews increase consumer uncertainty. The effects of more positive reviews and more numerous reviews on consumer choice are smaller on online retailing platforms that have fake product reviews.

Keywords: learning models; choice models; product reviews (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (67)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:32:y:2013:i:1:p:153-169

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