Double Learning or Double Blinding: An Investigation of Vendor Private Information Acquisition and Consumer Learning Via Online Reviews

Ann Oper Res 270, 213–234 (2018). https://doi.org/10.1007/s10479-016-2243-z

The University of Auckland Business School Research Paper Series

Posted: 10 Feb 2022

See all articles by Nan Hu

Nan Hu

Xi'an Jiaotong University (XJTU) - School of Management; Stevens Institute of Technology - School of Business

Kevin Dow

University of Auckland Business School

Alain Chong

Independent

Ling Liu

University of Wisconsin-Eau Claire

Date Written: 2018

Abstract

In this paper, building upon information acquisition theory and using portfolio methods and system equations, we made an empirical investigation into how online vendors and consumers are learning from each other, and how online reviews, prices, and sales interact among each other. First, this study shows that vendors acquire information from both private and public channels to learn the quality of their products to make price adjustment. Second, for the more popular products and newly released products, vendors are more motivated to acquire private information that is more precise than the average precision to adjust their price. Third, we document a full demand-mediation model between rating and price. In other words, there is no direct linkage between price and rating, and the impact of rating on price (the vendor learning) as well as the impact of price on rating (the consumer learning) are all through demand. Our results show that there is no fundamental difference between the pricing decisions with and without the consumer generated contents. The price is still driven by the supply and demand relationship and vendors only adjust their price in response to review change when those reviews impact sales. We proposed either the impact of reviews has been incorporated into sales or reviews are less truth worthy due to potential review manipulation. Given the complicate situation, we call for further study to unveil this double learning process with double blinding results. Full paper available at https://doi.org/10.1007/s10479-016-2243-z

Keywords: Online reviews, Word-of-mouth, Online product reviews, Double-learning, Analyst forecast

Suggested Citation

Hu, Nan and Hu, Nan and Dow, Kevin and Chong, Alain and Liu, Ling, Double Learning or Double Blinding: An Investigation of Vendor Private Information Acquisition and Consumer Learning Via Online Reviews (2018). Ann Oper Res 270, 213–234 (2018). https://doi.org/10.1007/s10479-016-2243-z, The University of Auckland Business School Research Paper Series, Available at SSRN: https://ssrn.com/abstract=4026995

Nan Hu (Contact Author)

Xi'an Jiaotong University (XJTU) - School of Management ( email )

28,Xianning West Road
Xi'an, Shaanxi 710049
China

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Kevin Dow

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Alain Chong

Independent ( email )

Ling Liu

University of Wisconsin-Eau Claire

Accounting and Finance
Eau Claire, WI 54702
United States

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