Production of Online Word of Mouth: Peer Effects and the Moderating Role of User Characteristics∗

We study peer effects on users’ contributions to an emerging form of online word of mouth—product reviews. Provided by either consumers or third-party professionals, online reviews are closely correlated with consumers’ purchasing decisions and product sales. Individuals have incentives of free riding and maximizing social capital when providing feedbacks online. We leverage a “natural experiment,” which leads to an exogenous expansion in the users population of a major online reviews platform, to better understand the trade-off between the two conflicting incentives. Our empirical findings are mainly two-fold. First, we find that a larger population of audience and peer review writers, an immediate consequence of the exogenous shock, causally leads to more reviews posted, higher and more diverse ratings assigned, and reviews of higher quality by the users. In addition, we find that these effects are moderated by user characteristics including activeness, expertise, and popularity. These results have implications for platforms that rely on user contributions, as well as for business in the management of their online product or service feedbacks.