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The Economic Significance of User-Generated Feedback

Author

Listed:
  • Michelle Haynes
  • Steve Thompson
Abstract
This paper examines the impact of user-generated feedback on price at a price comparison site or shopbot. It employs a modified hedonic price function to explore the use made by current potential consumers of the experience of past actual consumers in evaluating quality attributes that were not observable when the product was initially launched on to the market. Using a database of daily observations on 211 digital cameras traded on NexTag.com, we find that the product’s star rating, reflecting all the available individual assessments of the product, has a significant negative impact on the discount on the manufacturer’s recommended selling price at which the product is offered.

Suggested Citation

  • Michelle Haynes & Steve Thompson, 2012. "The Economic Significance of User-Generated Feedback," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 19(1), pages 153-166, February.
    • Handle: RePEc:taf:ijecbs:v:19:y:2012:i:1:p:153-166
    DOI: 10.1080/13571516.2012.642645
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    References listed on IDEAS

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    1. Nikolay Archak & Anindya Ghose & Panagiotis G. Ipeirotis, 2007. "Deriving the Pricing Power of Product Features by Mining Consumer Reviews," Working Papers 07-36, NET Institute.
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    4. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
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    6. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
    7. Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(4), pages 659-679.
    8. Landon, Stuart & Smith, Constance, 1997. "The Use of Quality and Reputation Indicators by Consumers: The Case of Bordeaux Wine," MPRA Paper 9283, University Library of Munich, Germany.
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