Do Product Reviews Really Reduce Search Costs?

Abstract

The literature on online product reviews is based on the fundamental premise that reviews impact search costs and also affect consumer confidence in their purchase decisions. However, this premise has not been proven in the literature. To this end we conducted an experiment using an eye-tracking machine to measure the impact of online editorial and customer reviews on consumer information search costs and on decision confidence. Search costs in this study are defined in terms of time costs and cognitive effort costs. We find that both editorial reviews and customer reviews when present separately reduce both search time and cognitive effort considerably, but not when present together. We also find that the presence of both types of reviews increases decision confidence considerably, but do not lower search costs. These results suggest that ecommerce firms can benefit from the presence of either or both editorial and customer reviews through either lower search costs, or higher decision confidence. We conclude with several managerial recommendations for e-commerce firms.

Keywords: ecommerce, product reviews, decision confidence, eye-tracking

JEL Classification: D12, D03, D19