Three Essays on Firm Behaviors in Online Market Platforms

Download or read book Three Essays on Firm Behaviors in Online Market Platforms written by Erfan Rezvani and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Across many online market platforms, customer reviews have become a prevailing mechanism to evaluate firms and disseminate information about the quality of their products/services. While prior research has well-documented the impact of such customer-generated information on firm performance such as sales (e.g. Chevalier and Mayzlin 2006, Liu, 2006), understanding how firms react to customer evaluations generates an interesting yet an underexplored topic for research. This dissertation, through three studies, aims to investigate how customer reviews tat are posted on online platforms shape how firms learn, communicate, and compete. Chapter 1 shows that learning from own experience follows an inverted U-shaped curve. This finding indicates that with increase in own experience, firms face lower customer evaluations in the short-run, but in the long-run they eventually improve their performance by reducing their customer dissatisfaction. The study also showed that learning from accumulated experience of similar firms has a U-shaped relationship with customer evaluation, and that the larger the performance gap, the more motivation organizations have to learn in order to stay on par with their competitors in terms of performance. Chapter 2 finds that the proportion of responsive peers (i.e. the extent of peer pressure) is correlated with a focal firm's responsiveness to its customer reviews. The extent of responsiveness, in turn, has a positive impact on customer review ratings. Moreover, this study finds that firm responsiveness has a weaker effect for branded (relative to independent) firms. The study also shows that firms with more experience in providing response to customers may observe a stronger positive effect vis-à-vis less experienced firms. However, the effect is limited to branded firms which may possess better capability to learn from their experience. Chapter 3 shows that, although online reputation (created by online customer reviews) can partly explain the price competition among firms with similar reputation, the quality and geographical location have more important effect in determining the intensity of price competition among firms. This study also finds that price competition is highly localized with respect to geographical location and quality.