The dynamics of online word-of-mouth and product sales-An empirical investigation of the movie industry

Wenjing Duan, Bin Gu, Andrew B. Whinston

Research output: Contribution to journalArticle

553 Citations (Scopus)

Abstract

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.

Original languageEnglish (US)
Pages (from-to)233-242
Number of pages10
JournalJournal of Retailing
Volume84
Issue number2
DOIs
StatePublished - Jun 2008
Externally publishedYes

Fingerprint

Motion Pictures
Industry
Internet
Word-of-mouth
Empirical investigation
Film industry
Retail

Keywords

  • E-commerce
  • Motion picture
  • Online user reviews
  • Simultaneous equations
  • Word-of-mouth

ASJC Scopus subject areas

  • Marketing
  • Applied Psychology

Cite this

The dynamics of online word-of-mouth and product sales-An empirical investigation of the movie industry. / Duan, Wenjing; Gu, Bin; Whinston, Andrew B.

In: Journal of Retailing, Vol. 84, No. 2, 06.2008, p. 233-242.

Research output: Contribution to journalArticle

@article{2e51b6ee7afc40839374c4d93eaac4bc,
title = "The dynamics of online word-of-mouth and product sales-An empirical investigation of the movie industry",
abstract = "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.",
keywords = "E-commerce, Motion picture, Online user reviews, Simultaneous equations, Word-of-mouth",
author = "Wenjing Duan and Bin Gu and Whinston, {Andrew B.}",
year = "2008",
month = "6",
doi = "10.1016/j.jretai.2008.04.005",
language = "English (US)",
volume = "84",
pages = "233--242",
journal = "Journal of Retailing",
issn = "0022-4359",
publisher = "Elsevier BV",
number = "2",

}

TY - JOUR

T1 - The dynamics of online word-of-mouth and product sales-An empirical investigation of the movie industry

AU - Duan, Wenjing

AU - Gu, Bin

AU - Whinston, Andrew B.

PY - 2008/6

Y1 - 2008/6

N2 - 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.

AB - 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.

KW - E-commerce

KW - Motion picture

KW - Online user reviews

KW - Simultaneous equations

KW - Word-of-mouth

UR - http://www.scopus.com/inward/record.url?scp=45249083412&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=45249083412&partnerID=8YFLogxK

U2 - 10.1016/j.jretai.2008.04.005

DO - 10.1016/j.jretai.2008.04.005

M3 - Article

AN - SCOPUS:45249083412

VL - 84

SP - 233

EP - 242

JO - Journal of Retailing

JF - Journal of Retailing

SN - 0022-4359

IS - 2

ER -