The Effect of Individual Online Reviews on Purchase Likelihood

45 Pages Posted: 31 Jan 2018 Last revised: 4 Sep 2019

See all articles by Prasad Vana

Prasad Vana

Tuck School of Business at Dartmouth

Anja Lambrecht

London Business School

Date Written: May 8, 2018

Abstract

Online product reviews constitute a powerful source of information for consumers. Past research has studied the effect of aggregate measures of reviews (such as, mean product rating and number of reviews) on consumer behaviour. In this study, we investigate how individual reviews displayed on a product webpage affect consumers’ purchase likelihood. Identifying this effect is challenging because retailers are free to select which reviews to display on the product page and in what order, making the display of reviews in particular positions potentially endogenous. We address this challenge by utilizing an empirical context where the retailer displays reviews by recency and exploit the variation in review positions generated as newer reviews are added on top of older ones. We find that individual reviews have a strong effect on consumer purchase decisions. These effects are particularly pronounced when individual reviews contrast with the aggregate information that is instantly available on the product page or help consumers resolve uncertainty about the product.

Keywords: Online Product Reviews, Electronic Commerce, Endogeneity

Suggested Citation

Vana, Prasad and Lambrecht, Anja, The Effect of Individual Online Reviews on Purchase Likelihood (May 8, 2018). Tuck School of Business Working Paper No. 3108086. Available at SSRN: https://ssrn.com/abstract=3108086 or http://dx.doi.org/10.2139/ssrn.3108086

Prasad Vana (Contact Author)

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States

Anja Lambrecht

London Business School ( email )

Regent's Park
London, NW1 4SA
United Kingdom

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