【主讲】Ying Lei (Boston University)
【主题】How Do Firms Advertise When Customer Reviews are Available?
【时间】2015年12月15日 (周二) 14：00-15：30
【地点】上海财经大学经济学院楼801室
【语言】英文
【摘要】Online consumer product reviews have become very popular and influential inconsumers’ purchase decisions. I study how competing firms choose advertisingand prices when customer reviews are available and when firms may build up loyalcustomer bases. The model predicts that higher-rated firms are more likely to bedominant in advertising. In other words, online reviews are a complement to firms’advertising. I also analyze an extreme case of the model: an entry game in which anentrant and an incumbent interact. I find that the availability of customer reviewsundoes the “fat-cat” effect of a big incumbent with a lot of loyal customers. Anincumbent with a high enough ratio of good reviews can successfully deter entryand maintain a high profit. Comparative statics of the theory model can explainthe pattern of advertising response to Yelp rating found in the empirical RDDpaper.1 Intuitively, when the capacity limit of a local business becomes binding, ajump in the display rating will reduce the complemental effect of online reviews onadvertising.
