Abstract

Online purchase has become a mainstream channel for modern consumers to acquire goods and services. With the emergence of Web 2.0, consumers are now able to view and exchange product information with trusted friends instead of strangers. The result is that the effects of social comparison can be naturally created while consumers communicate with their friends online. However, while the effects of social comparison on consumer purchases have been validated in the physical world, not much research has been dedicated to studying these effects in the virtual world. Therefore, in our research, we aim to empirically investigate how different kinds of social comparisons (physical social and virtual social) impact consumers' online purchasing behavior. In particular, we propose to use the concept of reference-point shift extended from Prospect Theory as the theoretical basis to account for consumers' decision making in an online purchasing environment. The empirical results of our two experiments consistently support most of our hypotheses. The results explicitly indicate that social comparison positively impacts consumers' psychological states (happiness and disappointment) and their willingness to buy and willingness to pay. Most interestingly, the value functions we depict based on the empirical results graphically demonstrate how social comparison induces the effect of reference-point shift

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