lecture 7 Flashcards
user generated content
content that is generated or created by an internet user who is a consumer of this information or content
Social media
the online platform that host this content
three factors that explain why social media took off
Digital social networks (structured information flow)
Machine intelligence (recommendations of friends and content over the network)
Smartphones
“always on”
Feeds our social brain
experience goods
some attribute (e.g. quality) remains unknown until purchase
do yelp star ratings affect demand/revenue
one star improvement leads to an approximately 9% increase in revenue
yelp increases consumers value of going to an independent restaurant
chains experience decline in revenue relative to independent restaurants post-yelp
reviews has a positive, causal impact on demand (effect for independent restaurants rather than chains, chain restaurants decline in revenue after yelp introduced
do management responses to online reviews impact future ratings
dip in relative ratings in the month before managers begin adopting responses
Relative increase in star ratings after responses begin
manager response lead to an increase in star rating of 0.097 stars appx 3% on trip advisor, translates to about 7,5% of the standard deviation in ratings
visibility of responses: do responses need to be visible
Reviewer 10 sees response on first page of TA
reviewer 11 sees response on second page of TA
–> response more efffective on reviewer 10 rather than reviewer 11
effect is larger when responses are visible to the viewer
takeaway: responding to reviews increases future ratings
After adopting responses, ratings increase by appx 0.1 stars (out of 5)
About 7.5 percent of a standard deviation
Effect larger when responses are visible to reviewer (i.e. on first page) also see more reviews, longer negative reviews
does incentivizing consumers reviews improve market outcomes?
price sensitive consumers are more likely to respond to incentivised reviews
after the review no increase in demand (on average)
takeaways: what do incentivised reviews do?
Induce more reviews
Lead to less positive reviews (no inflated ratings)
No impact on demand
Do fake reviews have a causal effect on sales
share of one star reviews increases after recruiting fake review stops
–> harmful to consumers
Fake reviews are prevalent, impact sales and decrease consumer welfare
what do incentivised reviews do
induce more reviews
lead to less positive reviews
do not impact demand
