Revealed Preference in Online Reviews: Purchase Verification in the Tablet Market

Decision Support Systems, 132, May 2020

Posted: 28 May 2020

See all articles by Jiaxiu He

Jiaxiu He

Business Department SUNY, Buffalo

Xin (Shane) Wang

University of Western Ontario

Mark Vandenbosch

University of Western Ontario - Richard Ivey School of Business

Barrie R. Nault

University of Calgary - Haskayne School of Business

Date Written: March 3, 2020

Abstract

The review systems of online platforms create a stream of online word-of-mouth that allows consumers to learn from others’ purchasing experience. However, it is difficult for consumers to discern the authenticity of a review or the reviewer’s level of experience with the product. Platforms can aid the authentication process by incorporating a verified purchase (VP) indication, or “badge” as is done on Amazon, in reviews where the consumer writing the review has verifiably purchased the focal product. A VP is a revealed preference for a product implying a utility-maximizing choice where the consumer writing the review has experience with the product. Combining an Amazon data set on tablet computers with the theory of revealed preference in online reviews, we uncover a surprising new result: the proportion of VP reviews (a revealed preference) is associated with higher future sales, and the effect of the proportion of VP reviews on sales dominates the effect of the mean rating. This novel use of VP with revealed preference theory has implications for new research in the design of recommendation systems, detecting fraudulent reviews, and online profiling/privacy. Moreover, the use of a VP badge is immediately applicable to firms and platforms.

Keywords: Revealed Preference, Product Review, Online Word-of-Mouth, Verified Purchase, Platform Strategy, Trust

Suggested Citation

He, Jiaxiu and Wang, Xin (Shane) and Vandenbosch, Mark and Nault, Barrie R., Revealed Preference in Online Reviews: Purchase Verification in the Tablet Market (March 3, 2020). Decision Support Systems, 132, May 2020, Available at SSRN: https://ssrn.com/abstract=3578077

Jiaxiu He

Business Department SUNY, Buffalo ( email )

Amherst, NY 14260
United States
(716) 878-4136 (Phone)

HOME PAGE: http://https://business.buffalostate.edu/faculty/jiaxiu-he

Xin (Shane) Wang

University of Western Ontario ( email )

1151 Richmond Street
Suite 2
London, Ontario N6A 5B8
Canada

Mark Vandenbosch

University of Western Ontario - Richard Ivey School of Business ( email )

1151 Richmond Street North
London, Ontario N6A 3K7
Canada

Barrie R. Nault (Contact Author)

University of Calgary - Haskayne School of Business ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

HOME PAGE: http://ucalgary.ca/bnault

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