How to Influence My Customers? The Impact of Electronic Market Design

Publication Type

Conference Proceeding Article

Publication Date

4-2008

Abstract

This paper investigates the strategic decisions of online vendors for offering different mechanism, such as sampling and online reviews of information products, to increase their online sales. Focusing on measuring the effectiveness of electronic market design (offering reviews, sampling, or both), our study shows that online markets behavior as communication markets, and consumers learn product quality information both passively (reading online reviews) and actively but subjectively (listening to music sampling). Using data from Amazon, first we show that sampling along is a strong product quality signal that reduces the product uncertainty after controlling for halo effect. In general, products with sampling option enjoy a higher conversion rate (which leads to better sales) than those without sampling because sampling decreases the uncertainty of consuming experience goods. Second, the impact of online reviews on sales conversion rate is lower for experience goods with a sampling option than those without. Third, when the uncertainty of the societal reviews is higher, sampling plays a more important role because it mitigates such uncertainty introduced by online reviews.

Keywords

conversion rate, electronic market design, halo effect, online product reviews, sampling

Discipline

Business | Computer Sciences

Research Areas

Information Systems and Management

Publication

Proceedings of the 17th International Conference on World Wide Web, April 21 - 25, 2008, Beijing, China

First Page

1117

Last Page

1118

ISBN

9781605580852

Identifier

10.1145/1367497.1367684

Publisher

ACM

City or Country

Beijing, China

Additional URL

http://dx.doi.org/10.1145/1367497.1367684

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