The role of online seller reviews and product price on buyers' willingness-to-pay: a risk perspective

Abstract

Third-party interpersonal communications such as online seller reviews play an important role in buyers’ purchase decisions in online markets. Although it is empirically clear that seller reviews (volume and valence) and product price contribute to buyers’ willingness-to-pay (WTP) differently across various studies, it is theoretically less understood why such effects qualitatively differ (e.g., positive vs negative), rendering unclear managerial implications for online marketers. In this paper, we study the role of online seller reviews and product price in buyers’ WTP. We offer a conceptual framework from a risk perspective in which we argue that the different effects of seller reviews and product price on buyers’ WTP may emerge simultaneously in an online market. We highlight two important drivers for such qualitatively different effects: a difference in buyers’ risk attitudes (averse, neutral, or seeking) and a difference in WTP measures (absolute or relative). We test our hypotheses and find good support for them both internally (an experimental study) and externally (an empirical study). Our research enhances the understanding of the relationship between online user reviews and online price dispersions while shedding light on better management of online user reviews for market makers.

Keywords:

• online seller review
• product price
• buyers’ risk attitude
• willingness-to-pay

Additional information

Notes on contributors

Jianan Wu

About the authors

Jianan Wu is an Associate Professor of Marketing at LSU's E. J. Ourso College of Business. He earned his Ph.D. of Business Administration from the Pennsylvania State University. His research focuses on understanding buyer behavior and firm strategy in electronic markets. His research has appeared in leading academic journals (e.g., Information Systems Research, European Journal of Information Systems, Journal of Marketing Research, Marketing Science, etc.) and has earned international recognition (e.g., the IJRM-EMAC Steenkamp Award). He is on the editorial review board of Journal of Interactive Marketing.

Edgardo Arturo Ayala Gaytán

Edgrdo Arturo Ayala Gaytán is an Associate Professor of Economics at Tecnológico de Monterrey, Campus Monterrey. He has published several papers in economic and marketing journals in the areas of economic growth and consumer behavior. He teaches courses of Economic Growth and Econometrics.