Topic:How Do Online Reviews Affect Consumers to “Like” Deal Vouchers before Consumption?

Speaker:Xitong Li

Affiliation:HEC Paris, France

Time:Monday, 5 Jan. 16:00pm

Location:Room K01 Guanghua Building 2

Abstract：This paper examines how online reviews affect consumers to “like” a restaurant’s deal vouchers before they redeem the vouchers and consume the deal. We build a stylized Bayesian learning model and derive the hypotheses: (1) a higher average of online reviews causes more Facebook Likes and voucher sales, but only when the number of reviews is sufficiently large; (2) these effects are greater for restaurants with more reviews; and (3) these effects are greater for restaurants with a larger variance in the review ratings. Interestingly, the third hypothesis contrasts to the prediction by some established theories that variance is a negative moderating factor of the effect of online reviews. We test the hypotheses using data of Groupon and LivingSocial deals. The empirical results largely support our hypotheses. In particular, we find the effect of displayed Yelp ratings on Facebook Likes is greater when the variance of ratings is larger, whereas the effect on voucher sales does not significantly differ with the variance. The results imply that perhaps consumers are risk averse when they consider endorsing a product to their peers before consumption.

Bio:Xitong Li is an Assistant Professor at the Department of Operations Management & Information Technology, HEC Paris, France. His research interests include how to use online data/information and the identification of causal impacts of using online data/information or social media. Specifically, he has two research streams. One is to use applied econometric (mainly reduced-form) methods for causal inference, and the other is to develop Web technologies and software systems for effectively using online data/services. Xitong holds a Ph.D. in Management from MIT Sloan School of Management, USA and a Ph.D. in Engineering from Tsinghua University, China.

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