Do links matter? An investigation of the impact of consumer feedback, recommendation networks, and price bundling on sales

Publication Type

Journal Article

Publication Date

5-2012

Abstract

Link structures among items within an E-commerce Web site can be regarded as a potential recommendation that helps new consumers quickly locate relevant products. In this paper, combining a modified version of Google's PageRank method with economic analysis of word of mouth, we investigate whether a product's position within a network composed of recommendation links is incrementally informative about its future sales. Based on data from Amazon.com, we document that with consumer word of mouth and other product characteristics controlled, the position of a product within a recommendation network does influence consumers' purchase decisions, and models incorporating link structure have a higher incremental predictive power of future sales than models without. In addition, as time elapses, the relative weights consumers placed on recommendations with price discount and those without are different. Last, we develop a learning mechanism through which we find the optimal damping value of the PageRank IR model in the Amazon context. Our results show that compared to general Internet surfing behavior, consumer consumption on Amazon is less random. We conclude that even though the product position within a recommendation network does influence customers' purchase behaviors, product sales are still mainly driven by their own product characteristics.

Keywords

collaborative-filtering cross sale, marketing strategy, online word of mouth (WOM), PageRank, price strategy

Discipline

Databases and Information Systems | E-Commerce

Research Areas

Data Science and Engineering

Publication

IEEE Transactions on Engineering Management

Volume

59

Issue

2

First Page

189

Last Page

200

ISSN

0018-9391

Identifier

10.1109/TEM.2010.2064318

Publisher

Institute of Electrical and Electronics Engineers

Additional URL

https://doi.org/10.1109/TEM.2010.2064318

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