The role of online seller reviews and product price on buyers' willingness-to-pay: a risk perspective

Jianan Wu and Edgardo Arturo Ayala Gaytán

European Journal of Information Systems, 2013, vol. 22, issue 4, 416-433

Abstract: Third-party interpersonal communications such as online seller reviews play an important role in buyers’ purchase decisions in online markets. Although it is empirically clear that seller reviews (volume and valence) and product price contribute to buyers’ willingness-to-pay (WTP) differently across various studies, it is theoretically less understood why such effects qualitatively differ (e.g., positive vs negative), rendering unclear managerial implications for online marketers. In this paper, we study the role of online seller reviews and product price in buyers’ WTP. We offer a conceptual framework from a risk perspective in which we argue that the different effects of seller reviews and product price on buyers’ WTP may emerge simultaneously in an online market. We highlight two important drivers for such qualitatively different effects: a difference in buyers’ risk attitudes (averse, neutral, or seeking) and a difference in WTP measures (absolute or relative). We test our hypotheses and find good support for them both internally (an experimental study) and externally (an empirical study). Our research enhances the understanding of the relationship between online user reviews and online price dispersions while shedding light on better management of online user reviews for market makers.

Date: 2013
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DOI: 10.1057/ejis.2012.33

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