Effects of Social Comparison on Online Purchasing Behavior

The rapid growth in online sales shows that online purchase has become a mainstream for modern consumers to acquire goods and services. In this research, we propose to use Prospect Theory as the theoretical basis to account for consumers’ psychological states in an online purchasing environment. In particular, we aim to empirically investigate whether social comparison acts as an essential factor that impacts consumers’ online purchasing behavior. Two experiments are conducted for this purpose. The first experiment is to examine how the effect of social comparison generated by friends and relatives (the physical world) impacts consumers’ online purchasing behavior. The empirical results strongly support most of our hypotheses and explicitly exhibit that social comparison positively increase online willingness to buy and willingness to pay. The second experiment is to further examine the effect of online social comparison generated by unknown people (the virtual world). The results of this experiment suggest that virtual social comparison does increase online willingness to buy, even though the effects on other aspects of purchase behavior do not show. Keyword: social comparison, online purchasing behavior Introduction Online purchasing behavior has received extensive attention from both industry and academia because it has become a popular purchasing trend in nowadays economy. Prior research indicates that more than 50 percent of US Internet users consume online regularly (Forrester Research, 2003). On the business side, researchers expect that 75% of US and Canadian firms will maintain or increase their e-commerce investments and anticipate that the overall e-commerce will grow 17% annually by 2008 (Gatti, 2004). All of these remarkable statistics reflect that online purchase has become a mainstream channel for consumers and e-marketers to conduct business activities. Although the advanced information technology enables prosperous growth of online economics and more consumers to use Internet as a main purchasing channel, this widespread adoption of e-commerce does not necessarily ensure increased profitability (Janson & Cecez-Kecmanovic, 2005). Many online firms still do not completely understand online customers’ needs and behavior in this relatively new purchasing channel (Constantinides, 2004; Lee, 2002). Therefore, in this research, we aim to study consumers’ online purchasing decisions, such as willingness to buy and willingness to pay. In particular, we would like to investigate how social comparison, from both physical world and virtual world, affects online purchasing behavior. Although Hoch & Loewenstein (1991) has accounted for the effects of social comparison on consumers’