Dynamic impacts of online reviews and other information sources on sales in panel data environment: Evidence from movie industry

Abstract

In recent years, with the significantly increasing impact of online reviews (a form of word-of-mouth) on consumer purchase decision, clarifying how this kind of information source influences consumer behaviors(usually represented by sales) have been exposed to more attentions in business and academic research fields. Differing from most existing studies which statically analyze relations between online reviews and sales with cross-section data, this paper, based on the movie industry context, employs panel data to dynamically explore the differences of the relationship between online reviews (mainly Volume and Valence) and movie box office revenues at moviespsila different life stages. Meanwhile, this paper further comparatively analyzes the variances of impacts of three information sources (including online reviews, critic reviews and movie production budgets) on movie box offices. Results show that, in panel data environment, the impacts of Volume and Valence of online reviews on movie box office revenues are varying and even mixed for moviespsila different life stages. The effects of Volume and Valence of online reviews on box offices are both insignificant in the movie opening week, while the other two information sources critic reviews and movie production budgets show positive influences on box offices, especially critic reviews exerting stronger impact. From the second week, the positive impact of online reviews Volume becomes significant, but the power of this effect declines in the following weeks. Our results also show that online reviews Valence positively impacts box offices in the third and fourth week, furthermore, the impact power exceeds the other two information sources.