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Abstract:
With the proliferation of online user review systems, there has been a growing interest in understanding how they influence consumers' purchase decisions. In this paper, we explore the dynamic process of online user reviews for motion pictures, and its relationship with movies' daily box office performance. We characterize online user reviews through a dynamic simultaneous system, in which we separate the effects of online user reviews as both a precursor to and an outcome of box office revenues. First, in contrast to the common wisdom that better user reviews lead to more sales, we showed that the rating of online user reviews has no significant impact on movies' box office revenues. Second, we found that box office sales are significantly influenced by the number of online postings. Our findings suggest that it is the underlying word-of-mouth effect that plays a dominant role rather than the user ratings. Online user review sites help reveal the underlying word-of-mouth process, but the sites themselves may not play as significant a role in influencing sales as commonly expected.

Online User Review; Word-of-Mouth; Product Sale; Motion Picture

Abstract:
There are growing interests in understanding how word-of-mouth (WOM) on the Internet is generated and how it influences consumers' purchase decisions at retail outlets. A unique aspect of the WOM effect is the presence of a positive feedback mechanism between WOM and retail sales. We characterize the process through a dynamic simultaneous equation system, in which we separate the effect of online WOM as both a precursor to and an outcome of retail sales. We apply our approach to the movie industry, showing that both a movie's box office revenue and WOM valence significantly influence WOM volume. WOM volume in turn leads to higher box office performance. This positive feedback mechanism highlights the importance of WOM in generating and sustaining retail revenue.

Online user reviews, Word-of-mouth, e-Commerce, Motion picture, Simultaneous equations

Abstract:
Online users often need to make adoption decisions without accurate information about the product values. An informational cascade occurs when it is optimal for an online user, having observed others' actions, to follow the adoption decision of the preceding individual without regard to his own information. Informational cascades are often rational for individual decision making; however, it may lead to adoption of inferior products. With easy availability of information about other users' choices, the Internet offers an ideal environment for informational cascades. In this paper, we empirically examine informational cascades in the context of online software adoption. We find user behavior in adopting software products is consistent with the predictions of the informational cascades literature. Our results demonstrate that online users' choices of software products exhibit distinct jumps and drops with changes in download ranking, as predicted by informational cascades theory. Furthermore, we find that user reviews have no impact on user adoption of the most popular product, while having an increasingly positive impact on the adoption of lower ranking products. The phenomenon persists after controlling for alternative explanations such as network effects, word-of-mouth (WOM) effects, and product diffusion. Our results validate informational cascades as an important driver for decision making on the Internet. The finding also offers an explanation for the mixed results reported in prior studies with regard to the influence of online user reviews on product sales. We show that the mixed results could be due to the moderating effect of informational cascades.

E-commerce, herding, informational cascades, decision making, network effects, word-of-mouth, software download, online communities, online user review

Abstract:
Recently, user-oriented online sharing communities (e.g., YouTube, Flickr) have seen explosive growth. In these communities, social norms are relatively weak compared to many message-based online communities, as users' attention is on content and communication among them is limited. Under this setting, it is crucial to understand the factors that affect a user's choice to share. We propose a three-factor decision framework to study users' choice of sharing, which we then empirically test using a five-year dataset collected in an IRC music sharing community. We find that a user is more likely to continue sharing if he receives more benefit directly from the community; if he has more social connections; and if he has a high recognized value to the community. We also test the validity of the results by controlling the impacts of aggregated community activities, individual characteristics, users' life span, and legal events.

Online sharing community, implicit community, IRC, voluntary contribution, music sharing

Abstract:
Online peer-to-peer communities and online social networks have become increasingly popular. In particular, the recent boost of online peer-to-peer communities leads to exponential growth in sharing of user-contributed content which have brought profound changes to business and economic practices. Understanding the formation and sustainability of such peer-to-peer communities has important implications for businesses. We develop a dynamic two-sided network model that relates growth of communities to interactions between contribution and consumption of resources in online sharing activities. Using online music sharing data collected from a popular IRC music sharing service over five years, we empirically apply the model to identify dynamics in the music sharing community. We find that the music sharing community demonstrates distinctive characteristics of a two-sided network. Contribution in the community leads to more consumption and consumption leads to more contribution, creating positive network effects in the community. Moreover, we find significant negative externalities among consumption activities and among contribution activities. The combination of the positive and negative externalities drives the underlying dynamics and growth of online sharing communities. Using the dynamic model, we quantify equilibrium growth rate of the community. We find that the equilibrium growth rate changes over time, possibly as a result of legal actions taken by the music industry. Our study provides a first glimpse into the mechanism through which peer-to-peer communities sustain and thrive in a constantly changing environment.

online communities, two-sided networks, IRC channel, P2P music sharing, evolutionary games, digital piracy

Abstract:
Recently user-oriented online sharing communities have seen explosive growth. Two characteristics of these communities set them apart from traditional online message-based communities such as online forums. First, users have no social ties before joining the community. Second, there is little or no "verbal" communication between users. This research investigates the structure and dynamics of online sharing communities using data collected from an IRC music channel from 2001 to 2006, covering all five years of the post-Napster age. We have collected more than three hundred million individual activities, capturing 0.05% of the global music sharing volume. We find that sharers are an essential part of the community and their activities have a dominant impact on the growth of the community. By contrast, free riders have two opposite impacts on sharer retention. More free riders in number make it more likely for a sharer to keep sharing, while more free rider activities discourage sharers from contributing. That is, the existence of free riders, despite the congestion caused by their download activities, does to some degree stabilize the community. Most previous literature examines the online community only from the aggregate level. Our study, nevertheless, distinguish the influence and behavior of different members in the community. Instead of paying only attention to the total number of users, our results suggest that understanding the impact of their core members is critical in investigating the dynamics and the sustainability of online sharing communities.

sharing community, sustainability, network externality, free-riding

Abstract:
Indirect reciprocity is an important factor that motivates individual contributions in social networks. However, prior studies of indirect reciprocity are often limited to a snapshot view of individual interactions in social environments. This paper analyzes indirect reciprocity from a dynamic perspective in the context of a peer-to-peer music sharing network. We have two main findings. First, we reveal that indirect reciprocity is a dynamic social force. An individual's likelihood of contribution changes with the social environment, particularly with others' contribution levels in the network. The individual increases her contribution probability when she observes an increase in the number of contributors while decreases her contribution probability when she observes an increase in the number of free riders. Second, we find that indirect reciprocity is a social norm that is voluntarily enforced by contributors in the network. They do so through the setting of servers to discriminate downloaders. When the number of free riders increases, a contributor is more likely to change the server settings to provide preferential services to other contributors and lesser services to free riders. Our results indicate that indirect reciprocity plays a key role in sustaining private contributions to social networks.

indirect reciprocity, social norm, social enforcement, social networks, peer-to-peer networks, public goods, incentive provisions, music sharing

Abstract:
Online users often need to make adoption decisions without accurate information about the product values. Herding is common in such situations where users infer values from other customers' choices and incorporate that information into their own decision-making process. Herding is often rational for individual decision-making; however, it may lead to adoption of inferior products. The Internet affects the herding phenomenon in adoption decisions in two ways. On the one hand, it provides more information about other users' choices, therefore making herding more feasible. On the other hand, the Internet provides more details about product values, thus making herding less desirable. In this paper, we empirically examine herd behavior in the context of online software adoption. Consistent with the predictions of the informational cascades literature, we find that online users engage in significant herd behavior in choosing software programs, and professional product reviews and user reviews have little impact on the popularity of software programs. We also find that, while product reviews do not directly affect software popularity, their availability mitigates the herd behavior. Our results validate informational cascades as an important driver for decision-making on the Internet.

E-commerce, herding, informational cascades, decision-making, network externalities, software download, online communities, online user review