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Title: Research on impacts of online reviews from channel perspectives
Authors: Yang, Wenjuan
Degree: Ph.D.
Issue Date: 2020
Abstract: In recent years, with the development of the Internet and information technology, online reviews, as one form of user-generated information, has begun to show its tremendous influence on consumers' purchase decisions. Compared with traditional media, such as newspapers or TV commercials, online reviews are more powerful and truthful because they are user-oriented and reveal more information about product attributes. A growing body of empirical research also has found that this information plays significant roles on firm's product sales and pricing strategies; yet theoretical work on the impacts of this emerging media is not sufficient. Besides, most prior work focus on the scenario where the retailer sells the products directly to consumers. In practice, abundant products are sold through distribution channels with manufacturers and retailers. Understanding the implication of online reviews on the pricing decisions and profits of players from channel perspectives is of academic interest and practical interest. However, the studies from this perspective are still limited. Thus, this dissertation attempts to fill this gap and studies the impacts of online reviews on the performance of channel members by considering different channel contexts. First, we investigate the effects of online reviews in a dual channel where a manufacturer distributes a product through a retail channel and an Internet channel. We develop game-theoretic models to capture the pricing decisions and profits of the manufacturer and the retailer with online reviews, under two different channel structures. In specific, under the centralized channel, online reviews may increase or decrease the direct price but always lower the retail price. Under the decentralized channel, we show that the manufacturer has a higher probability to charge a higher direct price than under the centralized channel, and the retailer also has the chance to improve the retail price. Further, under the two channel settings, it is not necessarily wise for the manufacturer to provide online reviews in the Internet channel unless the information revealed by online reviews is sufficiently favorable.
Second, we examine the impacts of online reviews in a supply chain with two competing manufacturers and a common retailer. The products are imperfectly substitutable with different qualities. By a two-period game model, we show that whether the retailer can increase or reduce the price difference of the two products in period 2 depends largely on the quality difference of the two products. Besides, online reviews affect the pricing decisions in the upstream and it is possible for the manufacturers to be better off simultaneously; the retailer can embrace the positive effect of online reviews only when consumers heavily underestimate the quality difference of the products but online reviews reveal an obvious quality difference. In addition, contrary to the conventional wisdom, we demonstrate that online reviews with more accurate information may be detrimental to the retailer and consumers. Third, given the tremendous influence of online reviews on consumers' purchase decisions, more firms engage in promotions of online reviews by taking some strategies to encourage more positive online reviews. We provide the theoretical analysis to investigate the impacts of such behavior in a manufacturer-retailer supply chain. Two channel structures are considered: the centralized structure and the decentralized structure. We assume that the retailer can make promotion decisions in a reasonable range and the manufacturer shares some cost. By comparing the results without and with promotions of online reviews, we discover that it is necessary to analyze the change of variance, which may enhance or undermine the effect of review promotions. Moreover, promoting online reviews may impair the demand under both channel structures, and the demand under the centralized channel is more likely to be affected. The surprised finding is that promotions of online reviews may not always favor the retailer and the manufacturer or hurt consumers. Last but not least, we reveal that, under the decentralized channel, the manufacturer has a greater threshold interval to benefit from the promotions of online reviews than the retailer; for the retailer, it is more likely to benefit from promotions of online reviews under the centralized channel than under the decentralized channel.
Subjects: Consumer behavior -- Economic aspects
Electronic commerce
Hong Kong Polytechnic University -- Dissertations
Pages: x, 104 pages : color illustrations
Appears in Collections:Thesis

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