When Online Reviews Meet Sales Volume Information: Is More or Accurate Information Always Better?

This paper studies how two types of market-generated information, namely, online reviews and past sales volume information, jointly affect consumer purchase decisions as well as firms’ pricing strategies. We build a two-period duopoly model in a market with herding consumers who have different preferences and are unsure of the quality difference between products. In addition, a firm’s sales volume is uncertain because of the existence of...