Relationship between Online Word-of-Mouth Communication and Consumer Behavior

Abstract

Online word-of-mouth communication was studied using a model that focuses on consumers' informational behavior in terms of retrieving and sending. This model was previously used in studies of the basic mechanisms of the winner-takes-all phenomenon and consumption concentration. We applied the model to online word-of-mouth communication by assuming heterogeneity across consumers in terms of individual informative actions. Consumers were assumed to communicate with other consumers selectively using one of three policies: random selection, similar-level selection, and higher-level selection. A basic simulation showed that the most effective policy for selecting communication partners depends on the characteristics of the goods under consideration. An agent-based simulation showed that an effective word-of-mouth policy also depends on the characteristics of the goods under consideration. These findings clarify how consumers deal with cognitive limitations in the face of the massive amount of information now available.