Modeling Consumer Learning from Online Product Reviews

Posted: 13 Nov 2013

See all articles by Yi Zhao

Yi Zhao

Georgia State University - Department of Marketing

Sha Yang

University of Southern California - Marshall School of Business

Vishal Narayan

NUS Business School

Ying Zhao

Hong Kong University of Science & Technology (HKUST)

Multiple version iconThere are 2 versions of this paper

Abstract

We propose a structural model to study the effect of online product reviews on consumer purchases of experiential products. Such purchases are characterized by limited repeat purchase behavior of the same product item (such as a book title) but significant past usage experience with other products of the same type (such as books of the same genre). To cope with the uncertainty in quality of the product item, we posit that consumers may learn from their experience with the same type of product and others' experiences with the product item. We model the review credibility as the precision with which product reviews reflect the consumer's own product evaluation. The higher the precision, the more credible the information obtained from product reviews for the consumer, and the larger the effect of reviews on the consumer's choice probabilities. We extend the Bayesian learning framework to model consumer learning on both product quality and review credibility. We apply the model to a panel data set of 1,919 book purchases by 243 consumers. We find that consumers learn more from online reviews of book titles than from their own experience with other books of the same genre. In the counterfactual analysis, we illustrate the profit impact of product reviews and how it varies with the number of reviews. We also study the phenomenon of fake reviews. We find that fake reviews increase consumer uncertainty. The effects of more positive reviews and more numerous reviews on consumer choice are smaller on online retailing platforms that have fake product reviews.

Keywords: learning models, choice models, product reviews

Suggested Citation

Zhao, Yi and Yang, Sha and Narayan, Vishal and Zhao, Ying, Modeling Consumer Learning from Online Product Reviews. Marketing Science, Vol. 32, No. 1, 2013; pp. 153-169; DOI: 10.1287/mksc.1120.0755. Available at SSRN: https://ssrn.com/abstract=2328517

Yi Zhao (Contact Author)

Georgia State University - Department of Marketing ( email )

United States

Sha Yang

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

Vishal Narayan

NUS Business School

Singapore

Ying Zhao

Hong Kong University of Science & Technology (HKUST) ( email )

Kowloon, 999999

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