Document Type
Discussion Paper
Publication Date
8-19-2020
CFDP Number
2254
CFDP Pages
28
Abstract
The propensity of consumers to engage in word-of-mouth (WOM) differs after good versus bad experiences, which can result in positive or negative selection of user-generated reviews. We show how the dispersion of consumer beliefs about quality (brand strength), informativeness of good and bad experiences, and price can affect selection of WOM in equilibrium. WOM is costly: Early adopters talk only if they can affect the receiver’s purchase. Under homogeneous beliefs, only negative WOM can arise. Under heterogeneous beliefs, the type of WOM depends on the informativeness of the experiences. We use data from Yelp.com to validate our predictions.
Recommended Citation
Chakraborty, Ishita; Deb, Joyee; and Öry (Oery), Aniko, "When Do Consumers Talk?" (2020). Cowles Foundation Discussion Papers. 2564.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/2564