The Effect of Individual Online Reviews on Purchase Likelihood

Online product reviews constitute a powerful source of information for consumers. Past research has studied the effect of aggregate measures of reviews (such as average product rating and number of reviews) on consumer behavior. In this study, we investigate how individual reviews displayed on a product web page affect consumers' purchase likelihood. Identifying this effect is challenging because retailers are free to select which reviews to display on the product page and in what order, making the display of reviews in particular positions potentially endogenous. We address this challenge by utilizing an empirical context in which the retailer displays reviews by recency and exploit the variation in review positions generated as newer reviews are added on top of older ones. We find that individual reviews have a strong effect on consumer purchase decisions even after accounting for a product's average rating. These effects are particularly pronounced when individual reviews help consumers resolve uncertainty about the product or contrast with the aggregate information that is instantly available on the product page.