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Unboxing the Causal Effect of Ratings on Product Demand: Evidence from Wayfair.com

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  • Evan Magnusson

Abstract

Using a regression discontinuity design, I estimate the causal effect of increasing product ratings by half a star on Wayfair.com to be a 5% increase in product demand. Utilizing a transaction‐level dataset, I show that this is driven by an increase in sales, not a price change. This effect is stronger for products with more reviews or sold by lesser‐known brands (and nonexistent for those with no reviews or from popular brands). Also, products with the highest ratings see the largest benefit from having a marginally higher rating. I fail to find reviews affecting repeat purchasers differently than first‐time customers.

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  • Evan Magnusson, 2022. "Unboxing the Causal Effect of Ratings on Product Demand: Evidence from Wayfair.com," Journal of Industrial Economics, Wiley Blackwell, vol. 70(3), pages 525-564, September.
    • Handle: RePEc:bla:jindec:v:70:y:2022:i:3:p:525-564
    DOI: 10.1111/joie.12302
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    References listed on IDEAS

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    Cited by:

    1. Ke & Ma & Sophie Yanying Sheng & Haitian Xie, 2023. "Employer Reputation and the Labor Market: Evidence from Glassdoor.com and Dice.com," Papers 2305.02587, arXiv.org, revised Sep 2023.

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