The dynamics of online word-of-mouth and product sales—an empirical investigation of the movie industry
Whinston, Andrew B.
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Citation (published version)W. DUAN, B. GU, A. WHINSTON. 2008. "The dynamics of online word-of-mouth and product sales—An empirical investigation of the movie industry." Journal of Retailing, Volume 84, Issue 2, pp. 233 - 242. https://doi.org/10.1016/j.jretai.2008.04.005
There are growing interests in understanding how word-of-mouth (WOM) on the Internet is generated and how it influences consumers’ purchase decisions at retail outlets. A unique aspect of the WOM effect is the presence of a positive feedback mechanism between WOM and retail sales. We characterize the process through a dynamic simultaneous equation system, in which we separate the effect of online WOM as both a precursor to and an outcome of retail sales. We apply our approach to the movie industry, showing that both a movie's box office revenue and WOM valence significantly influence WOM volume. WOM volume in turn leads to higher box office performance. This positive feedback mechanism highlights the importance of WOM in generating and sustaining retail revenue.
RightsThe accepted manuscript version of this work is made available under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 license.
This is an Accepted Manuscript of an article published by Taylor & Francis in the Journal of Management Information Systems in 2003, available online: http://dx.doi.org/10.1080/07421222.2003.11045763