How Does Probability Impact Consumers' Choice? The Case of Online Reviews

Gordon R. Foxall, Asle Fagerstrøm, Gheorghita Ghinea and Lars Sydnes

Managerial and Decision Economics, 2016, vol. 37, issue 4-5, 331-336

Abstract: Consumers are frequently in situations that include evaluating the probability of the outcome of a particular choice. It is, therefore, essential to analyze how probability influences choice in order to fully understand consumer behavior. This paper investigates how probability discounting contributes to the understanding of the impact of online reviews on consumer choice. An experiment with 25 participants was conducted. Participants were presented with an online shopping scenario in which they had to choose between two online shops: one with (positive) customer reviews (on delivery reliability and customer service) and higher product prices, while the other had lower prices, but no customer reviews at all. We employed a titration procedure over sales price for the web shop without customer reviews; this was run over seven probability conditions. The point where participants switched between one web shop and another was recorded, and the probability discounting factors were calculated. The results highlight that online reviews are indicators of successful online transactions (i.e., intention to buy) and therefore function as choice benchmarks. In the light of these results, the paper presents practical implications, as well as directions for future research. Copyright © 2015 John Wiley & Sons, Ltd.

Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:37:y:2016:i:4-5:p:331-336

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