Paper Info
Title
Price effects in online product reviews: an analytical model and empirical analysis
Abstract
Consumer reviews may reflect not only perceived quality but also the difference between quality and price (perceived value). In markets where product prices change frequently, these price-influenced reviews may be biased as a signal of product quality when used by consumers possessing no knowledge of historical prices. In this paper, we develop an analytical model that examines the impact of price-influenced reviews on firm optimal pricing and consumer welfare. We quantify the price effects in consumer reviews for different formats of review systems using actual market prices and online consumer ratings data collected for the digital camera market. Our empirical results suggest that unidimensional ratings, commonly used in most review systems, can be substantially biased by price effects. In fact, unidimensional ratings are more closely correlated with ratings of product value than ratings of product quality. Our findings suggest the importance for firms to account for these price effects in their overall marketing strategy and suggest that review systems could better serve consumers by explicitly expanding review dimensions to separate perceived value and perceived quality.
Year
DOI
Venue
2010
10.2139/ssrn.1282303
Informs Journal on Computing
Keywords
DocType
Volume
online product review,analytical model,historical price,empirical analysis,consumer welfare,online consumer ratings data,consumer review,price-influenced review,actual market price,price effect,product quality,unidimensional rating,review system
Journal
34
Issue
ISSN
Citations 
4
0276-7783
56
PageRank 
References 
Authors
1.67
7
2
Name
Order
Citations
PageRank
Xinxin Li141237.92
Lorin M. Hitt22426223.11