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 2254R, 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) can differ after good versus bad experiences. This can result in positive or negative selection of user-generated reviews. We show how the strength of brand image - determined by the dispersion of consumer beliefs about quality - and the informativeness of good and bad experiences impact the selection of WOM in equilibrium. Our premise is that WOM is costly: Early adopters talk only if their information is instrumental for the receiver's purchase decision. If the brand image is strong, i.e., consumers have close to homogeneous beliefs about quality, then only negative WOM can arise. With a weak brand image, positive WOM can occur if positive experiences are sufficiently informative. We show that our theoretical predictions are consistent with restaurant review data from Yelp.com. A review rating for a national established chain restaurant is almost 1-star lower (on a 5-star scale) than a review rating for a comparable independent restaurant, controlling for various reviewer and restaurant characteristics. Further, negative chain restaurant reviews have more instances of expectation words, indicating agreement over beliefs about the quality, whereas positive reviews of independent restaurants feature disproportionately many novelty words.

Keywords: Brand image; Costly communication; Recommendation engines; Review platforms; Word of mouth (search for similar items in EconPapers)
Pages: 43 pages
Date: 2020-08, Revised 2021-03
New Economics Papers: this item is included in nep-com, nep-cwa and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://cowles.yale.edu/sites/default/files/files/pub/d22/d2254-r.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Working Paper: When Do Consumers Talk? (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cwl:cwldpp:2254r

Ordering information: This working paper can be ordered from
Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA
The price is None.

Access Statistics for this paper

More papers in Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University Yale University, Box 208281, New Haven, CT 06520-8281 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Brittany Ladd ().