Do Online Reviews Matter? - an Empirical Investigation of Panel Data

Decision Support Systems, Vol. 45, No. 4, pp. 1007-1016, November 2008

33 Pages Posted: 9 Nov 2004 Last revised: 2 Aug 2014

Wenjing Duan

George Washington University - School of Business

Bin Gu

Arizona State University (ASU) - Department of Information Systems

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management

Date Written: Janurary 2005

Abstract

This study examines the persuasive effect and awareness effect of online user reviews on movies' daily box office performance. In contrast to earlier studies that take online user reviews as an exogenous factor, we consider reviews both influencing and influenced by movie sales. The consideration of the endogenous nature of online user reviews significantly changes the analysis. Our result shows that the rating of online user reviews has no significant impact on movies' box office revenues after accounting for the endogeneity, indicating that online user reviews have little persuasive effect on consumer purchase decisions. Nevertheless, we find that box office sales are significantly influenced by the volume of online posting, suggesting the importance of awareness effect. The finding of awareness effect for online user reviews is surprising as online reviews under the analysis are posted to the same website and are not expected to increase product awareness. We attribute the effect to online user reviews as an indicator of the intensity of underlying word-of-mouth that plays a dominant role in driving box office revenues.

Keywords: Online User Review, Word-of-Mouth, Product Sale, Motion Picture

JEL Classification: L82, M31

Suggested Citation

Duan, Wenjing and Gu, Bin and Whinston, Andrew B., Do Online Reviews Matter? - an Empirical Investigation of Panel Data (Janurary 2005). Decision Support Systems, Vol. 45, No. 4, pp. 1007-1016, November 2008. Available at SSRN: https://ssrn.com/abstract=616262

Wenjing Duan (Contact Author)

George Washington University - School of Business ( email )

2121 I Street NW
Washington, DC 20052
United States

Bin Gu

Arizona State University (ASU) - Department of Information Systems ( email )

Tempe, AZ
United States

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management ( email )

CBA 5.202
Austin, TX 78712
United States
512-471-8879 (Phone)

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