Experiential goods with network externalities effects: An empirical study of online rating system |
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| Authors: | Jun Yang Enping Mai |
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| Institution: | 1. Department of Marketing, Goethe University Frankfurt am Main, Theodor-W.-Adorno-Platz 4, 60323 Frankfurt, Germany;2. Institute of Marketing, School of Business and Economics, Humboldt University Berlin, Spandauer Str. 1, 10178 Berlin, Germany;1. E. J. Ourso College of Business, Louisiana State University, Baton Rouge, La 70803, USA;2. College of Business, City University of Hong Kong, Hong Kong, China |
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| Abstract: | This paper uses online users' reviews and sales information from May 2003 to March 2007 to study a new experiential product: online video game (or virtual world). The results suggest that, first of all, for a hedonic product such as an online video game, the availability of online review system could not fully transform experience attributes into search attributes. The empirical study confirms that negative word-of-mouth has more significant impact than positive reviews. The study empirically verifies that the existence of direct network externalities (i.e. a product's value increases when more consumers join the network) is crucial for a hedonic product. The size of the user base signals the quality of the game, and works like a search attribute for potential users. A large user base will reduce the negative impact from unfavorable reviews. |
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