The role of cognitive complexity and risk aversion in online herd behavior

G. Rejikumar (), Aswathy Asokan-Ajitha, Sofi Dinesh and Ajay Jose
Additional contact information
G. Rejikumar: Kochi Campus
Aswathy Asokan-Ajitha: Indian Institute of Management Amritsar
Sofi Dinesh: Kochi Campus
Ajay Jose: Life Insurance Corporation of India

Electronic Commerce Research, 2022, vol. 22, issue 2, No 15, 585-621

Abstract: Abstract This paper investigated the role of information related, social and customer characteristics in public information adoption tendencies of online customers to result in herding in e-commerce. E-commerce platforms contains numerous online reviews about products which have the potential to influence customers. We applied structural equation modeling and a 2 × 2 scenario experiment to empirically verify the effect of a few factors in creating online herding. Two levels of cognitive complexity (simple, complex) and risk aversion (risk averse, risk taker) formed the 2 × 2 factorial design. The study's primary finding was that a person with simple cognitive structure and risk avoidance tendency may exhibit higher intention to adopt public information and engage in herding. Information specific attributes contributed maximum towards information adoption and herding. Among sociological variables, only reputation concern significantly predicted both information adoption and herding. Theoretically, the study offered a framework to explore herding intentions online and augmented the observations from the information adoption model. The quality of concise information from credible sources significantly instigates adoption of public information contained in online reviews. From the perspective of marketers, having a better understanding of herding behaviors and its mechanisms can enable the e-commerce platform to reduce herding’s erosion on the wisdom of the crowd by optimizing its information structures (i.e., public information, private information, etc.).

Keywords: Information adoption; Herding; Cognitive complexity; Risk aversion; Scenario-based experiment (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10660-020-09451-y

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