Too Popular to Ignore: The Influence of Online Reviews on Purchase Intentions of Search and Experience Products

Consumers assess the credibility of online product reviews to guide their purchase decisions. However, little is known about how consumers determine the credibility of online product reviews. This article examines the effect of the level of detail in a product review and the level of reviewer agreement with it on the credibility of a review and consumers' purchase intentions for search and experience products. Overall, the results indicate that more credible reviews lead to higher purchase intentions. Interestingly, the findings also demonstrate that consumers determine the credibility of a review differently for search and experience products. For search products, consumers deem online reviews to be more credible when the reviews contain detailed information about the product. However, for experience products, consumers determine the credibility of a review by assessing the level of reviewer agreement with a review. The lack of diagnosticity of detailed information in online reviews of experience products is attributed to the idiosyncratic nature of experiences. Implications for research and practice are discussed.     

A diffusion approximation for the ruin function of a risk process with compounding assets

Abstract

The traditional theory of collective risk is concerned with fluctuations in the capital reserve {Y(t): t ?O} of an insurance company. The classical model represents {Y(t)} as a positive constant x (initial capital) plus a deterministic linear function (cumulative income) minus a compound Poisson process (cumulative claims). The central problem is to determine the ruin probability ψ(x) that capital ever falls to zero. It is known that, under reasonable assumptions, one can approximate {Y(t)} by an appropriate Wiener process and hence ψ(.) by the corresponding exponential function of (Brownian) first passage probabilities. This paper considers the classical model modified by the assumption that interest is earned continuously on current capital at rate β > O. It is argued that Y(t) can in this case be approximated by a diffusion process Y*(t) which is closely related to the classical Ornstein-Uhlenbeck process. The diffusion {Y*(t)}, which we call compounding Brownian motion, reduces to the ordinary Wiener process when β = O. The first passage probabilities for Y*(t) are found to form a truncated normal distribution, which approximates the ruin function ψ(.) for the model with compounding assets. The approximate expression for ψ(.) is compared against the exact expression for a special case in which the latter is known. Assuming parameter values for which one would anticipate a good approximation, the two expressions are found to agree extremely well over a wide range of initial asset levels.     

Experimental Evidence on Alternative Environmental Valuation Methods

Experimental methods are central to assessments of environmental valuation approaches that are operationally meaningful. Existing lab experiments focus attention sharply on the neglect of hypothetical bias. They also offer constructive solutions to correct this bias, and beg for validation in field experiments.     

The Changing Landscape of Regulatory Control of Biological Medicines

This paper focuses on the rapid growth in biological medicines in recent years brought about by advances in molecular biology and biotechnological manufacturing techniques. It looks at the implications for regulatory bodies and research institutions concerned with quality control of biologicals; and discusses ways in which the industry/regulatory/research partnership is evolving in response to the new situation. It argues that, although change is being managed relatively successfully in some areas of regulatory control (devolution to industry, use of new technologies, international harmonization), special measures may be needed in some other areas. These include: needs of the developing world for biologicals quality control; sustaining long-term research on safety issues and test methodology; major social and ethical issues raised by new treatment and diagnostic opportunities.     

OPTIMAL GROWTH STRATEGIES FOR PASTORAL FIRMS IN THE QUEENSLAND BRIGALOW SCHEME

The Brigalow Scheme has been one of Australia's largest dryland development projects since World War II. Large sums of private and public capital have been invested to create 247 new farm firms. Planning the development of these new properties is a complex task. A simulation model of the typical block in Area III of the Brigalow Scheme has been constructed and used to evaluate experimentally the financial performance of various growth strategies. Use of a conjugate directions search procedure with this model has allowed growth strategies to be identified which maximize net worth subject to a low risk of financial failure. These strategies are compared with development programmes which have already been implemented. Significant conclusions are reached both with respect to future management strategies and future land development policies. Methodological advances incorporated in the simulation model are also discussed.     

Returns to scale and externalities in the consumption and investment sectors

Using data on US manufacturing, I estimate internal returns to scale and external effects for the consumption and investment sectors. I construct panels of data at the industry level and use results of gross output production function estimation to derive implied estimates in a value added specification. For the investment sector, returns to scale appear to be slightly increasing, with evidence of a positive external effect. For consumption, the evidence indicates decreasing to constant returns to scale. I discuss the implications of these results for the empirical plausibility of indeterminacy in recent multi-sector models of the business cycle.