Experiential goods with network externalities effects: An empirical study of online rating system

• Published in: Journal of business research 2010-09, Vol.63 (9), p.1050-1057
• Main Authors: Yang, Jun, Mai, Enping (Shirley)
• Format: Article
• Language: English
• Subjects: Computer & video games; Consumer behaviour; Electronic commerce; Evaluation; Experience attributes; Experiential goods; Experiential goods Hedonic goods Network externalities Word-of-mouth Virtual worlds Experience attributes; Externalities; Externality; Hedonic goods; Impact analysis; Information exchange; Internet; Network externalities; Networks; Product quality; Shopping; Studies; User behavior; Virtual worlds; Word of mouth advertising; Word-of-mouth
• ISSN: 0148-2963; 1873-7978
• DOI: 10.1016/j.jbusres.2009.04.029

This paper uses online users' reviews and sales information from May 2003 to March 2007 to study a new experiential product: online video game (or virtual world). The results suggest that, first of all, for a hedonic product such as an online video game, the availability of online review system could not fully transform experience attributes into search attributes. The empirical study confirms that negative word-of-mouth has more significant impact than positive reviews. The study empirically verifies that the existence of direct network externalities (i.e. a product's value increases when more consumers join the network) is crucial for a hedonic product. The size of the user base signals the quality of the game, and works like a search attribute for potential users. A large user base will reduce the negative impact from unfavorable reviews.