Production of Online Word-of-Mouth: Peer Effects and the Moderation of User Characteristics

Abstract

We study peer effects on individuals’ contributions to an emerging form of online word of mouth — product reviews. Provided by either consumers or third-party professionals, online reviews are closely correlated with consumer purchasing decisions and product sales. Individuals have incentives of free riding and maximizing social capital when providing feedbacks online. We leverage a “natural experiment,” which led to an exogenous expansion in the user population of a major online review platform to better understand the trade-off between the two conflicting incentives. Our empirical findings are mainly two-fold. First, we find that a larger population of audience and peer review writers, an immediate consequence of the exogenous shock, causally led to more reviews posted, higher and more diverse ratings assigned, and reviews of higher quality by the users. In addition, we find that these effects were moderated by user characteristics of activeness, expertise, and popularity. These results have implications for platforms that rely on user contributions and for any company in the management of online product or service feedback.