The Impact Of Open Online Reviews On Consumer Purchasing Decision Making

In online market, information asymmetry exists due to the lack of face-to-face contact between buyers and sellers. Many online transaction platforms provide an online review mechanism to reduce such risk, which allows consumers to give review feedback about the quality of product or service after consumption. Potential consumers can use these reviews as valuable references when making purchase. The ―open‖ feature of online reviews refers that consumers are able to view complete review content freely without having to register or sign in. Since open online reviews provide valuable referring information, consumers will convert their purchase decisions into product sales eventually. Thus, the effect of open online reviews on consumer decision making can be reflected in its influence on product sales performance.As a classic topic in electronic commerce, the importance of open online review mechanism on sales performance has been debuted greatly. Most prior studies assume that consumers use utility-based compensatory decision rules to make purchase decision. However in practical online transactions, information overload is particularly prevalent due to the fast development of online market and information technology. The combination of overwhelming choices and high risks increases cognitive strain in decision making process. As a result, consumers are more likely to resort to proper decision rules in online pu rchase decisions to reduce cognitive strain and simplify decision making process. Based on related theories and behavioral research methodologies, this paper discusses the influence of open online reviews on consumer decision making process, product sales and the selection of consumer decision rules.First, this research develops nonlinear decision models, which do not require individual level data, but allows estimation of relevant parameters that consumers use in their decision process. Specifically, this study shows that our model allows the identification of the distribution of the EBA threshold among consumers as well as the compensatory relationship between multiple factors. This study also shows that under EBA, the relationship between seller reputat ion and product sales takes the form of a zero-inflated negative binomial model where the inflation function captures the EBA rules.Using data of a search product-Canon 550 D collected from Taobao, this study provides evidence that in an information-overload situation, consumers apply EBA to eliminate sellers whose reputation grades are below a certain threshold. The thresholds vary across consumers but the mean threshold is high. And the seller reputation grade has two effects on consumer decision making p rocess. First, there is an EBA effect- seller reputation determines that a proportion of consumers will never consider a seller given their use of EBA and this effect is non-compensatory. Second, there is a utility effect-retailer reputation influences the amount of product sales by those consumers who consider this seller and this effect is compensatory. Using data of other search product, the study shows that the threshold is influenced by product price. The threshold is higher for higher price product.Secondly, enterprise and retailers, who have realized the importance of online reviews, try to manipulate online reviews to improve their business, which leads to deceptive review problems. Accordingly, Taobao develops two new review types to tackle this issue, namely ―review with picture‖ and ―follow-up review‖. Based on conceptual model in above-mentioned study, this research explores how online reviews especially these new types of reviews, affect consumer behavior. The results show that when sellers manipulate reviews, traditional types of reviews are still influential on consumer decision making process. Besides, although these new types of reviews do not represent review valence, they significantly present consumer complaints and negatively influence potential consumers. These new types of reviews verify the bias caused by review manipulation to a certain extent.Lastly, taking the experience product of hotels as research samples, this paper discusses the particularity of decision rules utility during consumer decision making process. This paper focuses on how online reviews moderate the relationship among hotel attributes and consumer decision-making, and compares such effects by the volume and valence dimensions of open online reviews. With the practical hotel booking data collected from Expedia.com, this research analyzes consumer decision making behavior in the hotel industry. This research testifies room price negatively influences consumer purchase decision and star rating positively influences consumer purchase decision, and more importantly, identifies a negative moderating effect of online reviews on the relationship between hotel attributes and consumer purchase decision.This paper provides new research methodologies and thoughts for consumer decision rules and online review research in the electronic commerce field. Meanwhile, the results provide valuable suggestions for consumers and business practitioners, as well as online platform managers.