Temporal contiguity and negativity bias in the impact of online word of mouth
| Authors | Chen, Lurie |
| Journal | Journal of Marketing Research |
| Year | 2013 |
| Type | Published Paper |
| Abstract | Prior research shows that positive online reviews are less valued than negative reviews. The authors argue that this is due to differences in causal attributions for positive versus negative information such that positive reviews tend to be relatively more attributed to the reviewer (vs. product experience) than negative reviews. The presence of temporal contiguity cues, which indicate that review writing closely follows consumption, reduces the relative extent to which positive reviews are attributed to the reviewer and mitigates the negativity bias. An examination of 65,531 Yelp.com restaurant reviews shows that review value is negatively related to review valence but that this negative relationship is absent for reviews that contain temporal contiguity cues. A series of lab studies replicates these findings and suggests that temporal contiguity cues enhance the value of a positive review and increase the likelihood of choosing a product with a positive review by changing reader beliefs about the cause of the review. |
| Keywords | Word of mouth, negativity bias, temporal contiguity, causal attributions |
| URL | https://doi.org/10.1509/jmr.12.0063 |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Social Transmission Biases |
The price of a CEO's rolodex
| Authors | Engelberg, Gao, Parsons |
| Journal | Review of Financial Studies |
| Year | 2013 |
| Type | Published Paper |
| Abstract | CEOs with large networks earn more than those with small networks. An additional connection to an executive or director outside the firm increases compensation by about $17,000 on average, more so for "important" members, such as CEOs of big firms. Pay-for-connectivity is unrelated to several measures of corporate governance, evidence in favor of an efficient contracting explanation for CEO pay. |
| Keywords | CEO compensation, social networks, information value, corporate governance |
| URL | https://doi.org/10.1093/rfs/hhs114 |
| Tags | Archival Empirical | Manager / Firm Behavior | Social Network Structure | Theory |
The determinants of attitudes toward strategic default on mortgages
| Authors | Guiso, Sapienza, Zingales |
| Journal | Journal of Finance |
| Year | 2013 |
| Type | Published Paper |
| Abstract | We use survey data to measure households' propensity to default on mortgages even if they can afford to pay them (strategic default) when the value of the mortgage exceeds the value of the house. The willingness to default increases in both the absolute and the relative size of the home-equity shortfall. Our evidence suggests that this willingness is affected by both pecuniary and non-pecuniary factors, such as views about fairness and morality. We also find that exposure to other people who strategically defaulted increases the propensity to default strategically because it conveys information about the probability of being sued. |
| URL | https://doi.org/10.1111/jofi.12044 |
| Tags | Archival Empirical | Financing- and Investment Decisions (Individual) |
With a little help from my (random) friends: Success and failure in post-business school entrepreneurship
| Authors | Lerner, Malmendier |
| Journal | Review of Financial Studies |
| Year | 2013 |
| Type | Published Paper |
| Abstract | How do individuals decide to become entrepreneurs and learn to make optimal entrepreneurial decisions? The concentration of entrepreneurs in regions such as Silicon Valley has stimulated research and policy interest into the influence of peers, but the causal effect is hard to identify empirically. We exploit the exogenous assignment of students into business-school sections to identify the causal effect of entrepreneurial peers. We show that, in contrast to prior findings, a higher share of entrepreneurial peers decreases, rather than increases, entrepreneurship. The decrease is driven by a reduction in unsuccessful entrepreneurial ventures; the effect on successful ventures is significantly more positive. |
| URL | https://doi.org/10.1093/rfs/hht024 |
| Tags | Archival Empirical | Manager / Firm Behavior |
Digitizing doctor demand: The impact of online reviews on doctor choice
| Authors | Luca, Vats |
| Year | 2013 |
| Type | Working Paper |
| Abstract | We present empirical evidence for the impact of patient reviews on consumers' physician choices. Our study is based on ZocDoc.com - a unique website that integrates patient reviews, and appointment scheduling for physicians on one platform. Using ZocDoc we construct a novel data set consisting of all reviews written for primary care physicians in Manhattan, New York. We then pair these reviews with data on appointments that are booked through ZocDoc, during February-May, 2013. Our data suggest that patient reviews are becoming an important source of reputation for physicians. About 25% of New York primary care physicians are now listed on ZocDoc, and 84% of them have at least 5 reviews. Because ZocDoc displays each physician's rounded average rating to patients, we can use regression discontinuity to identify the causal impact of patient ratings on patient demand. We find that half a star improvement in ratings, on a scale of 1 to 5 stars, leads to a 10% increase in the likelihood, at the mean, that a doctor will fill an appointment. |
| URL | https://www.aeaweb.org/conference/2014/retrieve.php?pdfid=55.%20Accessed%205/23/18 |
| Tags | Archival Empirical | Consumer Decisions |
Executive networks and firm policies: Evidence from the random assignment of MBA peers
| Authors | Shue |
| Journal | Review of Financial Studies |
| Year | 2013 |
| Type | Published Paper |
| Abstract | Using the historical random assignment of MBA students to sections at Harvard Business School (HBS), I explore how executive peer networks can affect managerial decision making. Within an HBS class, firm outcomes are significantly more similar among graduates from the same section than among graduates from different sections, with the strongest effects in executive compensation and acquisitions strategy. I demonstrate the role of ongoing social interactions by showing that peer effects are more than twice as strong in the year following staggered alumni reunions. Supplementary tests suggest that peer influence can operate in ways that do not contribute to firm productivity. |
| URL | https://doi.org/10.1093/rfs/hht019 |
| Tags | Archival Empirical | Manager / Firm Behavior |
Learning from the crowd: Regression discontinuity estimates of the effects of an online review database
| Authors | Anderson, Magruder |
| Journal | Economic Journal |
| Year | 2012 |
| Type | Published Paper |
| Abstract | Internet review forums increasingly supplement expert opinion and social networks in informing consumers about product quality. However, limited empirical evidence links digital word-of-mouth to purchasing decisions. We implement a regression discontinuity design to estimate the effect of positive Yelp.com ratings on restaurant reservation availability. An extra half-star rating causes restaurants to sell out 19 percentage points (49%) more frequently, with larger impacts when alternate information is more scarce. These returns suggest that restaurateurs face incentives to leave fake reviews but a rich set of robustness checks confirm that restaurants do not manipulate ratings in a confounding, discontinuous manner. |
| Keywords | Sports events, media, Olympics, Olympic stocks, retail investors, valuation, fundamentals, comovement, categorization, investor sentiment, investor recognition, common factor, stay-at-home, meme |
| URL | https://doi.org/10.1111/j.1468-0297.2012.02512.x |
| Tags | Archival Empirical | Consumer Decisions | Manager / Firm Behavior | Media and Textual Analysis |
What makes online content viral?
| Authors | Berger, Milkman |
| Journal | Journal of Marketing Research |
| Year | 2012 |
| Type | Published Paper |
| Abstract | Why are certain pieces of online content (e.g., advertisements, videos, news articles) more viral than others? This article takes a psychological approach to understanding diffusion. Using a unique data set of all the New York Times articles published over a three-month period, the authors examine how emotion shapes virality. The results indicate that positive content is more viral than negative content, but the relationship between emotion and social transmission is more complex than valence alone. Virality is partially driven by physiological arousal. Content that evokes high-arousal positive (awe) or negative (anger or anxiety) emotions is more viral. Content that evokes low-arousal, or deactivating, emotions (e.g., sadness) is less viral. These results hold even when the authors control for how surprising, interesting, or practically useful content is (all of which are positively linked to virality), as well as external drivers of attention (e.g., how prominently content was featured). Experimental results further demonstrate the causal impact of specific emotion on transmission and illustrate that it is driven by the level of activation induced. Taken together, these findings shed light on why people share content and how to design more effective viral marketing campaigns. |
| Keywords | Word of mouth, viral marketing, social transmission, online content |
| URL | https://doi.org/10.1509/jmr.10.0353 |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Media and Textual Analysis | Social Transmission Biases |
Peer effects and loan repayment: Evidence from the Krishna default crisis
| Authors | Breza |
| Year | 2012 |
| Type | Working Paper |
| Abstract | Around the world, microfinance ties borrowers together using group repayment meetings, shared oaths and often, joint liability. Microfinance institutions (MFIs) have invested heavily in building social capital and generally boast stellar repayment rates. However, recent repayment crises have fueled speculation that peer effects might also reinforce default behavior. I estimate the causal effect of peer repayment on individuals' repayment decisions in the absence of joint liability following a district-level default in which 100% of borrowers temporarily defaulted on their loans and after which borrowers gradually decided whether to repay. Because the defaults occurred simultaneously, the timing of the shock induced variation in repayment incentives both at the individual and peer group levels. Individuals (or peer groups) near the end of their 50-week loan cycles were closest to receiving new loans and had the strongest incentives to repay; those who had recently received disbursements had the weakest. Using the variation in the peer group's incentives to instrument for peer repayment, I find that if a borrower's peers shift from full default to full repayment, she is 10-15pp more likely to repay. Last, I present a dynamic discrete choice model of the repayment decision to estimate the net benefit of the peer mechanism to the MFI. Repayers' positive influence on others (not non-repayers' negative influence) mainly drives the effect. Thus, peer effects actually improve repayment rates relative to a counterfactual without peer effects. |
| URL | https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfiles/6030/Draft_2013_april_v2.pdf |
| Tags | Archival Empirical | Financing- and Investment Decisions (Individual) |
Friends with money
| Authors | Engelberg, Gao, Parsons |
| Journal | Journal of Financial Economics |
| Year | 2012 |
| Type | Published Paper |
| Abstract | When banks and firms are connected through interpersonal linkages - such as their respective management having attended college or previously worked together - interest rates are markedly reduced, comparable with single shifts in credit ratings. These rate concessions do not appear to reflect sweetheart deals. Subsequent firm performance, such as future credit ratings or stock returns, improves following a connected deal, suggesting that social networks lead to either better information flow or better monitoring. |
| Keywords | Asymmetric information, bank lending, cost of debt, social connections, lending outcomes |
| URL | https://doi.org/10.1016/j.jfineco.2011.08.003 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Investment Decisions (Institutional) | Manager / Firm Behavior | Social Network Structure |
Designing ranking systems for hotels on travel search engines by mining user-generated and crowd sourced content
| Authors | Ghose, Ipeirotis, Li |
| Journal | Marketing Science |
| Year | 2012 |
| Type | Published Paper |
| Abstract | User-generated content on social media platforms and product search engines is changing the way consumers shop for goods online. However, current product search engines fail to effectively leverage information created across diverse social media platforms. Moreover, current ranking algorithms in these product search engines tend to induce consumers to focus on one single product characteristic dimension (e.g., price, star rating). This approach largely ignores consumers' multidimensional preferences for products. In this paper, we propose to generate a ranking system that recommends products that provide, on average, the best value for the consumer's money. The key idea is that products that provide a higher surplus should be ranked higher on the screen in response to consumer queries. We use a unique data set of U.S. hotel reservations made over a three-month period through Travelocity, which we supplement with data from various social media sources using techniques from text mining, image classification, social geotagging, human annotations, and geomapping. We propose a random coefficient hybrid structural model, taking into consideration the two sources of consumer heterogeneity the different travel occasions and different hotel characteristics introduce. Based on the estimates from the model, we infer the economic impact of various location and service characteristics of hotels. We then propose a new hotel ranking system based on the average utility gain a consumer receives from staying in a particular hotel. By doing so, we can provide customers with the "best-value" hotels early on. Our user studies, using ranking comparisons from several thousand users, validate the superiority of our ranking system relative to existing systems on several travel search engines. On a broader note, this paper illustrates how social media can be mined and incorporated into a demand estimation model in order to generate a new ranking system in product search engines. We thus highlight the tight linkages between user behavior on social media and search engines. Our interdisciplinary approach provides several insights for using machine learning techniques in economics and marketing research. |
| Keywords | Gender, conference calls, textual analysis, euphemisms, abnormal returns |
| URL | https://doi.org/10.1287/mksc.1110.0700 |
| Tags | Archival Empirical | Media and Textual Analysis |
Peer performance and stock market entry
| Authors | Kaustia, Knupfer |
| Journal | Journal of Financial Economics |
| Year | 2012 |
| Type | Published Paper |
| Abstract | Peer performance can influence the adoption of financial innovations and investment styles. We present evidence of this type of social influence: recent stock returns that local peers experience affect an individual's stock market entry decision, particularly in areas with better opportunities for social learning. The likelihood of entry does not decrease as returns fall below zero, consistent with people not talking about decisions that have produced inferior outcomes. Market returns, media coverage, local stocks, omitted local variables, short sales constraints, and stock purchases within households do not seem to explain these results. |
| Keywords | Investor behavior, peer effect, social interaction, social influence, stock market participation |
| URL | https://doi.org/10.1016/j.jfineco.2011.01.010 |
| Tags | Archival Empirical | Financing- and Investment Decisions (Individual) | Social Transmission Biases |
Do internet stock message boards influence trading? Evidence from heavily discussed stocks with no fundamental news
| Authors | Sabherwal, Sarkar, Zhang |
| Journal | Journal of Business Finance & Accounting |
| Year | 2012 |
| Type | Published Paper |
| Abstract | This study extends the literature on the information content of stock message boards. To better understand the effect of online postings on trading activities and reduce the error due to stocks with small message board followings, we examine stocks with no fundamental news and high message posting activity. Such stocks tend to be of small firms with weak financials. For those stocks, we find a two-day pump followed by a two-day dump manipulation pattern among online traders, which suggests that an online stock message board can be used as a herding device to temporarily drive up stock prices. We also find that online traders' credit-weighted sentiment index, but not the number of postings, is positively associated with contemporaneous return and negatively predicts the return next day and two days later. Also, absolute sentiment is negatively related with contemporaneous and next day's intraday volatility and positively related with the proportion of volume in small-sized trades. We conclude that message board sentiment is an important predictor of trading-related activities. |
| Keywords | Internet stock message board, online trading, investor sentiment, noise trader, naive bayesian, text classifier |
| URL | https://onlinelibrary.wiley.com/doi/full/10.1111/j.1468-5957.2011.02258.x |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Media and Textual Analysis |
The effects of traditional and social earned media on sales: A study of a microlending marketplace
| Authors | Stephan, Galak |
| Journal | Journal of Marketing Research |
| Year | 2012 |
| Type | Published Paper |
| Abstract | Marketers distinguish three types of media: paid (e.g., advertising), owned (e.g., company website), and earned (e.g., publicity). The effects of paid media on sales have been extensively covered in the marketing literature. The effects of earned media, however, have received limited attention. The authors examine how two types of earned media, traditional (e.g., publicity and press mentions) and social (e.g., blog and online community posts), affect sales and activity in each other. They analyze 14 months of daily sales and media activity data from a microlending marketplace website using a multivariate autoregressive time-series model. They find that (1) both traditional and social earned media affect sales; (2) the per-event sales impact of traditional earned media activity is larger than for social earned media; (3) because of the greater frequency of social earned media activity, after adjusting for event frequency, social earned media's sales elasticity is significantly greater than traditional earned media's; and (4) social earned media appears to play an important role in driving traditional earned media activity. |
| Keywords | Social media, short selling, intraday trading, retail investors |
| URL | https://www.jstor.org/stable/41714453 |
| Tags | Archival Empirical | Financing- and Investment Decisions (Individual) | Media and Textual Analysis |
How does the variance of product ratings matter?
| Authors | Sun |
| Journal | Management Science |
| Year | 2012 |
| Type | Published Paper |
| Abstract | This paper examines the informational role of product ratings. We build a theoretical model in which ratings can help consumers figure out how much they would enjoy the product. In our model, a high average rating indicates a high product quality, whereas a high variance of ratings is associated with a niche product, one that some consumers love and others hate. Based on its informational role, a higher variance would correspond to a higher subsequent demand if and only if the average rating is low. We find empirical evidence that is consistent with the theoretical predictions with book data from Amazon.com and BN.com. A higher standard deviation of ratings on Amazon improves a book's relative sales rank when the average rating is lower than 4.1 stars, which is true for 35% of all the books in our sample. |
| URL | https://www.jstor.org/stable/41432790 |
| Tags | Archival Empirical | Consumer Decisions |
The institutional legacy of the Ottoman Empire: Islamic rule and financial development in South Eastern Europe
| Authors | Grosjean |
| Journal | Journal of Comparative Economics |
| Year | 2011 |
| Type | Published Paper |
| Abstract | This paper uses a historical experiment - the occupation of South Eastern Europe by the Ottoman Empire - to shed light on the persistence of financial development. Interest-lending prohibition persisted under Islamic rule much longer than in the rest of Europe. The unique history and political fragmentation of the region allows investigating within-country effects, in six countries that were formerly only partly occupied by the Ottoman Empire. Former Islamic rule is consistently associated with lower contemporaneous formal financial development, both across and within countries. It is associated with a decrease in bank penetration by 10% across countries and 4% within countries. However, within country, the effect of the Ottoman Empire is confined to financial development. There is no association between former Ottoman rule, income, small and medium sized enterprise development or entrepreneurship. The effect is robust to controlling for a wide number of observable characteristics. Moreover, localities with Armenian, Jewish or Greek minorities, who were allowed to practice interest lending under Ottoman rule, have higher levels of bank penetration. By contrast, Islamic religion and trust in the financial system play no role in explaining such long-term persistence. |
| Keywords | Banking penetration, institutional persistence, Islamic finance, Ottoman Empire |
| URL | https://www.sciencedirect.com/science/article/pii/S0147596710000405 |
| Tags | Archival Empirical | Experimental / Survey-Based Empirical |
Opinion leadership and social contagion in new product diffusion
| Authors | Iyengar, Bulte, Valente |
| Journal | Marketing Science |
| Year | 2011 |
| Type | Published Paper |
| Abstract | We study how opinion leadership and social contagion within social networks affect the adoption of a new product. In contrast to earlier studies, we find evidence of contagion operating over network ties, even after controlling for marketing effort and arbitrary systemwide changes. More importantly, we also find that the amount of contagion is moderated by both the recipients' perception of their opinion leadership and the sources' volume of product usage. The other key finding is that sociometric and self-reported measures of leadership are weakly correlated and associated with different kinds of adoption-related behaviors, which suggests that they probably capture different constructs. We discuss the implications of these novel findings for diffusion theory and research and for marketing practice. |
| Keywords | Superstition, insurance, rural household |
| URL | https://doi.org/10.1287/mksc.1100.0566 |
| Tags | Archival Empirical | Consumer Decisions | Social Network Structure |
Religious beliefs, gambling attitudes, and financial market outcomes
| Authors | Kumar, Page, Spalt |
| Journal | Journal of Financial Economics |
| Year | 2011 |
| Type | Published Paper |
| Abstract | This study investigates whether geographic variation in religion-induced gambling norms affects aggregate market outcomes. We conjecture that gambling propensity would be stronger in regions with higher concentrations of Catholics relative to Protestants. Consistent with our conjecture, we show that in regions with higher Catholic-Protestant ratios, investors exhibit a stronger propensity to hold lottery-type stocks, broad-based employee stock option plans are more popular, the initial day return following an initial public offering is higher, and the magnitude of the negative lottery-stock premium is larger. Collectively, these results indicate that religion-induced gambling attitudes impact investors' portfolio choices, corporate decisions, and stock returns. |
| Keywords | Gambling, religion, institutional investors, employee stock option plans, IPOs |
| URL | https://doi.org/10.1016/j.jfineco.2011.07.001 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Manager / Firm Behavior |
Reviews, reputation, and revenue: The case of Yelp.Com
| Authors | Luca |
| Year | 2011 |
| Type | Working Paper |
| Abstract | Do online consumer reviews affect restaurant demand? I investigate this question using a novel dataset combining reviews from the website Yelp.com and restaurant data from the Washington State Department of Revenue. Because Yelp prominently displays a restaurant's rounded average rating, I can identify the causal impact of Yelp ratings on demand with a regression discontinuity framework that exploits Yelp's rounding thresholds. I present three findings about the impact of consumer reviews on the restaurant industry: (1) a one-star increase in Yelp rating leads to a 5-9 percent increase in revenue, (2) this effect is driven by independent restaurants; ratings do not affect restaurants with chain affiliation, and (3) chain restaurants have declined in market share as Yelp penetration has increased. This suggests that online consumer reviews substitute for more traditional forms of reputation. I then test whether consumers use these reviews in a way that is consistent with standard learning models. I present two additional findings: (4) consumers do not use all available information and are more responsive to quality changes that are more visible and (5) consumers respond more strongly when a rating contains more information. Consumer response to a restaurant's average rating is affected by the number of reviews and whether the reviewers are certified as "elite" by Yelp, but is unaffected by the size of the reviewers' Yelp friends network. |
| URL | https://ssrn.com/abstract=1928601 |
| Tags | Archival Empirical | Consumer Decisions |
Social learning and peer effects in consumption: Evidence from movie sales
| Authors | Moretti |
| Journal | Review of Economic Studies |
| Year | 2011 |
| Type | Published Paper |
| Abstract | Using box-office data for all movies released between 1982 and 2000, I quantify how much the consumption decisions of individuals depend on information they receive from their peers, when quality is ex ante uncertain. In the presence of social learning, we should see different box-office sales dynamics depending on whether opening weekend demand is higher or lower than expected. I use a unique feature of the movie industry to identify ex ante demand expectations: the number of screens dedicated to a movie in its opening weekend reflects the sales expectations held by profit-maximizing theatre owners. Several pieces of evidence are consistent with social learning. First, sales of movies with positive surprise and negative surprise in opening weekend demand diverge over time. If a movie has better than expected appeal and therefore experiences larger than expected sales in Week 1, consumers in Week 2 update upward their expectations of quality, further increasing Week 2 sales. Second, this divergence is small for movies for which consumers have strong priors and large for movies for which consumers have weak priors. Third, the effect of a surprise is stronger for audiences with large social networks. Finally, consumers do not respond to surprises in first-week sales that are orthogonal to movie quality, like weather shocks. Overall, social learning appears to be an important determinant of sales in the movie industry, accounting for 32% of sales for the typical movie with positive surprise. This implies the existence of a large "social multiplier" such that the elasticity of aggregate demand to movie quality is larger than the elasticity of individual demand. |
| Keywords | Financial market, investors' behavior, household finance, monetary policy, personal savings, post-pandemic, emotional communities, wallstreetbets, attention-induced trading, gamification |
| URL | https://doi.org/10.1093/restud/rdq014 |
| Tags | Archival Empirical | Consumer Decisions |