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Experiential goods with network externalities effects: An empirical study of online rating system

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  • Yang, Jun
  • Mai, Enping (Shirley)

Abstract

This paper uses online users' reviews and sales information from May 2003 to March 2007 to study a new experiential product: online video game (or virtual world). The results suggest that, first of all, for a hedonic product such as an online video game, the availability of online review system could not fully transform experience attributes into search attributes. The empirical study confirms that negative word-of-mouth has more significant impact than positive reviews. The study empirically verifies that the existence of direct network externalities (i.e. a product's value increases when more consumers join the network) is crucial for a hedonic product. The size of the user base signals the quality of the game, and works like a search attribute for potential users. A large user base will reduce the negative impact from unfavorable reviews.

Suggested Citation

  • Yang, Jun & Mai, Enping (Shirley), 2010. "Experiential goods with network externalities effects: An empirical study of online rating system," Journal of Business Research, Elsevier, vol. 63(9-10), pages 1050-1057, September.
    • Handle: RePEc:eee:jbrese:v:63:y::i:9-10:p:1050-1057
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