Bounded rationality: are higher online review ratings always better for sales?

Research output: Contribution to journalArticlepeer-review

Abstract

Intuitively, high online review ratings should benefit sales. However, the previous findings show mixed results. The effect of online review ratings on purchases might vary by many factors. We utilize the bounded rationality theory to predict that consumers might seek to satisfice rather than maximize when they evaluate online review ratings to make purchase decisions. The effect of online review ratings on purchase decisions is likely to be concave if bounded rationality prevails in decision-making. If consumers seek a ‘good-enough’ level of online review ratings rather than the optimal rating, the marginal merit is smaller for higher ratings that are more than satisfactory. Findings from more than ten million consumer choices on Expedia.com indicate that the marginal effect of online review ratings on consumer decisions varies and the effect is concave.

Original languageEnglish
JournalBehaviour and Information Technology
DOIs
StateAccepted/In press - 2022

Keywords

  • bounded rationality
  • decision-making
  • Online reviews
  • reference effect
  • satisficing
  • word of mouth

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