When Do Consumers Talk?

Ishita Chakraborty, Joyee Deb () and Aniko Oery ()
Additional contact information
Ishita Chakraborty: Yale School of Management
Joyee Deb: Cowles Foundation, Yale University
Aniko Oery: Cowles Foundation, Yale University
Authors registered in the RePEc Author Service: Aniko Öry

No 2254, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The propensity of consumers to engage in word-of-mouth (WOM) differs after good versus bad experiences, which can result in positive or negative selection of user-generated reviews. We show how the dispersion of consumer beliefs about quality (brand strength), informativeness of good and bad experiences, and price can affect selection of WOM in equilibrium. WOM is costly: Early adopters talk only if they can affect the receiver's purchase. Under homogeneous beliefs, only negative WOM can arise. Under heterogeneous beliefs, the type of WOM depends on the informativeness of the experiences. We use data from Yelp.com to validate our predictions.

Keywords: Costly communication; Recommendation engines; Review platforms; Word of mouth (search for similar items in EconPapers)
Pages: 28 pages
Date: 2020-08
New Economics Papers: this item is included in nep-com, nep-mic and nep-mkt
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Working Paper: When Do Consumers Talk? (2021)
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