How to Influence My Customers? The Impact of Electronic Market Design
Conference Proceeding Article
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.
conversion rate, electronic market design, halo effect, online product reviews, sampling
Business | Computer Sciences
Information Systems and Management
Proceedings of the 17th International Conference on World Wide Web, April 21 - 25, 2008, Beijing, China
City or Country
HU, Nan; LIU, Ling; CHEN, Bing; and SHEN, Jialie.
How to Influence My Customers? The Impact of Electronic Market Design. (2008). Proceedings of the 17th International Conference on World Wide Web, April 21 - 25, 2008, Beijing, China. 1117-1118. Research Collection School Of Information Systems.
Available at: http://ink.library.smu.edu.sg/sis_research/335