The Signaling Effect of Critics - Evidence from a Market for Experience Goods
AbstractExperience goods are characterized by information asymmetry and a lack of ex ante knowledge of product quality, such that credible and reliable external signals of product quality are likely to be highly valued. Due to their independence and expert reputations, professional critics therefore have the potential to significantly influence buyer behavior and hence product demand. In order to empirically verify the influence of critic reviews on market success, we analyze a sample of 1,480 video games and their sales figures between 2004 and 2010. We find strong evidence to suggest that reviews from professional critics have a significant effect upon sales and serve as a signal that helps consumer to overcome uncertainty and support the decision making process. The influence of professional critics on sales is also found to substantially outweigh that of word-of-mouth reviews from other consumers.
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Bibliographic InfoPaper provided by University of Paderborn, CIE Center for International Economics in its series Working Papers with number 68.
Length: 21 pages
Date of creation: Sep 2013
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More information through EDIRC
Signaling Theory; Information Asymmetry; Critics; Video Games;
Find related papers by JEL classification:
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-28 (All new papers)
- NEP-CTA-2013-09-28 (Contract Theory & Applications)
- NEP-IPR-2013-09-28 (Intellectual Property Rights)
- NEP-MKT-2013-09-28 (Marketing)
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