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ERIC Number: ED564717
Record Type: Non-Journal
Publication Date: 2013
Pages: 152
Abstractor: As Provided
Reference Count: N/A
ISBN: 978-1-3036-3346-1
Impact of Online User-Generated Content on Retailers and Manufacturers
Kwark, Young
ProQuest LLC, Ph.D. Dissertation, The University of Texas at Dallas
Online user-generated content has been ubiquitous. Consumers are eager to not only listen to the other consumers but provide opinion to the public. The former reduces the consumers' uncertainty about products and the latter reduces the firms' uncertainty about consumers. We examine the effect of online product reviews, a most common form of user-generated content, on different players in an online channel structure. We consider a retailer selling two substitutable products produced by different manufacturers, and the products differ in both their qualities and the fits to consumers' needs. Building a game theoretical model, we find that the information provided by reviews on the quality dimension homogenizes consumers' perceived utility differences between the two products and increases the upstream competition, which benefits the retailer but hurts the manufacturers, whereas fit information heterogenizes consumers' estimated fits to the products and softens the upstream competition, which hurts the retailer but benefits the manufacturers. We find that the retailer can be hurt by reviews and in some cases the harm occurs when reviews have a high precision; whether reviews are favorable does not necessarily benefit the manufacturers. We show that the effect of reviews on the upstream competition between the manufacturers is critical in understanding which firms gain and which firms lose. Retailers can choose different pricing schemes: a retailer either buys products from competing manufacturers and resells to consumers (wholesale scheme) or lets manufacturers directly sell to consumers on its platform for a commission (platform scheme). We demonstrate that the quality information and fit information play very different roles in changing the upstream competition, and whether the retailer can benefit from the reviews critically depends on its pricing scheme choice. Lastly, we examine the effect of user-generated content on the competing firms' product design when it reduces the firms' uncertainty about consumer taste or consumer valuation on quality. Because user-generated content is common and accessible by all firms in general, it also makes firms' information more correlated. We find that the reduced uncertainty by user-generated content always hurts the firms whereas the increased correlation can benefit the firms with unknown consumer taste. [The dissertation citations contained here are published with the permission of ProQuest LLC. Further reproduction is prohibited without permission. Copies of dissertations may be obtained by Telephone (800) 1-800-521-0600. Web page:]
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Publication Type: Dissertations/Theses - Doctoral Dissertations
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A