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Abstract
Intangibility of products in online environment results in higher information asymmetry. To overcome this asymmetric information issue, consumers may rely upon online reviews, i.e. word of mouse as a signal of quality. Two models were chosen to measure the impact of word of mouse characteristics on consumer's decision for this study. An objective data (proxy measures) as well as subjective data (questionnaire measures) was collected for the reviews available at Epinions.com. Results revealed that reviewer's reputation, expertise and message comprehensiveness are the most influential characteristics of word of mouse information. Identity disclosure, message timeliness and message accuracy were not significant predictors of information usefulness.
Key Words: Word of mouse, electronic word of mouth, information usefulness, information asymmetry, online reviews, consumer decisions.
1. Introduction
Perils of information asymmetry are vastly prevalent in market interactions these days. One economic agent holds more information about the products/services being offered in contrast to the other economic agent (Akerlof, 1970). Presence of information asymmetry can lead to numerous problems. Spence (1973) demonstrated how signalling can help market agents to overcome the problems caused by information asymmetry.
Online commerce has some advantages over traditional commerce, yet some problems are vested into it. For instance, there exist more information asymmetry in online setting because buyers cannot find out the sellers identity and assess the product before a purchase (Smith, 2004). Consumers have to rely on various online signals to cope with such problems. Online reviews, a form of word of mouse (electronic word of mouth) are one such kind of signaling technique that consumers rely upon to overcome the asymmetric information in an online context.
Word of Mouse communication facilitates consumers not only to gather relevant information from the people they already know but also the people who are unknown and geographically dispersed all over the world. Word of mouse communication has more impact on the consumer's trust and behaviour on the internet. In a traditional environment, consumers have the facility to examine the products visually and tangibly while in the online environment they only have visual facility. As a result they face higher uncertainty and word of mouse helps to attain higher levels of market transparency (Bickart and Schindler, 2001).Thus consumers' reliance on word of mouse becomes useful.
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