This study uses the concept of probability discounting to understand the impact of online customer reviews on consumer choice. Probability discounting describes how the subjective value of an outcome alters when its delivery shifts from certain to uncertain. An experimental study with 29 participants was conducted. Participants were run through an online shopping scenario where they had to choose whether to buy a product from a Web shop with customer reviews on reliability or from a Web shop without reviews but with a lower product price. A titration procedure over sales price for the Web shop without reviews was run over seven probability conditions. The mean switching points where participants chose where to buy the product were extracted from the experimental data, and probability discounting factors were calculated. The results supported the assumption that online reviews indicate the probability of a successful transaction online and function as a guide to choices. Implications for marketers as well as suggestions for future research are discussed.
Consumers are frequently in situations that include evaluation of probability of the outcome of a choice. It is, therefore, essential to analyze how probability influences choice to fully understand consumer behavior. This paper investigates how probability discounting contributes to the understanding of the impact of online reviews on consumer choice. An experiment with 25 participants was conducted. Participants were presented with an online shopping scenario in which they had to choose between two online shops: one with (positive) customer reviews and higher product prices, and the other having lower prices, but no customer reviews at all. We employed a titration procedure over sales price for the web shop without customer reviews on delivery reliability and customer service was run over seven probability conditions. The point where participants switched between one web shop or another were recorded, and probability discounting factors calculated. Results highlight that online reviews are an indicator of successful online transactions (i.e. intention to buy), and therefore function as choice benchmarks. In the light of these results, the paper presents practical implications, as well as directions for future research.
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