Start Date
11-12-2016 12:00 AM
Description
Monetary incentives have been proposed as a motivator for online product reviewing behavior. However, the economic value of paying for reviews is unclear, and the trade-off between the tangible expenditure of paying for reviews and the potential value from increasing product sales has neither been established in the academic literature nor in practice. Using archival panel data from a major online retailer, this study takes advantage of a quasi-natural experiment to examine the relationship among monetary incentives, online reviews, and product sales. We show with a 2SLS method that the retailer’s decision to devaluate the monetary incentives for writing reviews reduced its product sales by 18.9% through decreasing the volume of reviews received dramatically, while it only saved 0.2% of its sales revenue from paying consumers less for reviews. We conclude that monetary incentives for writing reviews can enhance product sales, contributing to the emerging literature on online product reviews.
Recommended Citation
Wang, Shuting Ada; Pavlou, Paul; and Gong, Jing, "Monetary Incentives, Online Reviews, and Product Sales: An Empirical Investigation" (2016). ICIS 2016 Proceedings. 9.
https://aisel.aisnet.org/icis2016/Economics/Presentations/9
Monetary Incentives, Online Reviews, and Product Sales: An Empirical Investigation
Monetary incentives have been proposed as a motivator for online product reviewing behavior. However, the economic value of paying for reviews is unclear, and the trade-off between the tangible expenditure of paying for reviews and the potential value from increasing product sales has neither been established in the academic literature nor in practice. Using archival panel data from a major online retailer, this study takes advantage of a quasi-natural experiment to examine the relationship among monetary incentives, online reviews, and product sales. We show with a 2SLS method that the retailer’s decision to devaluate the monetary incentives for writing reviews reduced its product sales by 18.9% through decreasing the volume of reviews received dramatically, while it only saved 0.2% of its sales revenue from paying consumers less for reviews. We conclude that monetary incentives for writing reviews can enhance product sales, contributing to the emerging literature on online product reviews.