The Impact of Consumer Reviews on Consumer Search and Firm Profits

Dina Mayzlin, Yale School of Management, USA
Wendy Moe, University of Maryland, USA
How do customer reviews affect consumer search, company profits, and category-level performance? Reviews can serve as a matching tool, reducing consumer uncertainty. Consequently, introducing reviewing at the retailer level may have two possible effects: 1) Re-allocate sales across different products within a category which may boost consumer utility but have little effect on short-run retailer profits, and/or 2) Raise firm profits by increasing consumers purchase probability and willingness to pay. We look at the effect of consumer reviews on category sales and traffic within a site. We find that reviews impact both search and sales and increase consumer willingness to pay.
[ to cite ]:
Dina Mayzlin and Wendy Moe (2010) ,"The Impact of Consumer Reviews on Consumer Search and Firm Profits", in NA - Advances in Consumer Research Volume 37, eds. Margaret C. Campbell, Jeff Inman, and Rik Pieters, Duluth, MN : Association for Consumer Research, Pages: 118-121 .