Understanding the Impact of Online Reviews on Customer Choice: A Probability Discounting Approach

Abstract

This study uses the concept of probability discounting to understand the impact of online customer reviews on consumer choice. Probability discounting describes how the subjective value of an outcome alters when its delivery shifts from certain to uncertain. An experimental study with 29 participants was conducted. Participants were run through an online shopping scenario where they had to choose whether to buy a product from a Web shop with customer reviews on reliability or from a Web shop without reviews but with a lower product price. A titration procedure over sales price for the Web shop without reviews was run over seven probability conditions. The mean switching points where participants chose where to buy the product were extracted from the experimental data, and probability discounting factors were calculated. The results supported the assumption that online reviews indicate the probability of a successful transaction online and function as a guide to choices. Implications for marketers as well as suggestions for future research are discussed.