The impact of customer reviews and advertisement efforts on the performance of experience goods in electronic markets

Bernd Frick and Daniel Kaimann

Applied Economics Letters, 2017, vol. 24, issue 17, 1237-1240

Abstract: When searching products online, costumers are facing a multitude of information signals of product quality they need to process – both separately and jointly – for relevance and reliability. A potentially reliable informations source is past experience of customers expressed in online reviews. In this article, we analyse the impact of customer reviews and additional signals of quality on buying behaviour in electronic markets. To empirically estimate and separate the effects, we use data from the Apple App Store covering 5792 daily observations from 2015. We find clear evidence to suggest that reviews and ads have a significantly positive influence on download rates. We also find empirical evidence to suggest that a considerable degree of interaction is important in explaining variations in market performance, especially between customer average ratings and unanimity of customer reviews.

Date: 2017
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DOI: 10.1080/13504851.2016.1270399

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