How do reviews from professional critics interact with other signals of product quality? Evidence from the video game industry

Abstract

Experience goods are characterized by information asymmetry and a lack of ex ante knowledge of product quality, such that reliable external signals of quality are likely to be highly valued. Two potentially credible sources of such information are reviews from professional critics and 'word-of-mouth' from other consumers. This paper makes a direct comparison between the relative influences and interactions of reviews from both of these sources on the sales performance of video games software. In order to empirically estimate and separate the effects of the two signals, we analyze a sample of 1,480 video games and their sales figures between 2004 and 2010. We find evidence to suggest that, even after taking steps to control for endogeneity, reviews from professional critics have a significantly positive influence on sales which outweighs that from consumer reviews. We also find evidence to suggest that reviews from professional critics also interact significantly with other signals of product quality. Consequently, we contend that professional critics adopt the role of an influencer, whereas word-of-mouth opinion acts more as a predictor of sales in the market for video games.

Variety in the video game industry: An empirical study of the Wundt curve

“…Video games represent classical examples of experience goods, as consumers are not able to assess their product quality before consumption (Cox & Kaimann, ). Thus, video games are characterized by information asymmetry between consumers and producers and a lack of ex ante knowledge of product quality.…”

Network Effects, Bargaining Power, and Product Review Bias: Theory and Evidence

“…As the marketing literature on product reviews suggests better reviews result in higher sales (see Basuroy et al . [2013], and Cox and Kaimann [2015], among many others), this implies the existence of motive and opportunity for producers to extort inflated reviews from reviewers. The reviewer requires access to the product to earn revenue and in many cases may also rely on advertising revenues from the producer.…”

“…A key finding in this literature is that the impact of expert reviews on sales persists despite the increased role played by physical and digital word‐of‐mouth in the dissemination of information (Basuroy et al . [2013]; Cox and Kaimann [2015]). Cox [2013] and Cox and Kaimann [2015] show evidence that positive expert reviews influence sales specifically in the video game industry.…”

“…[2013]; Cox and Kaimann [2015]). Cox [2013] and Cox and Kaimann [2015] show evidence that positive expert reviews influence sales specifically in the video game industry. Both studies find that a 1 per cent increase in a game’s Metacritic score is associated with a 1.5 per cent increase in sales.…”

“…[1997]), art (Caves [2000]), wine (Hilger et al . [2011]; Friberg and Gronqvist [2012]), automobiles (Dewenter and Heimeshoff [2015]), and video games (Zhu and Zhang [2010]; Cox [2013]; Cox and Kaimann [2015]). Since it is clear that expert reviews can influence demand and that the ‘journalism sub‐industry’ of many industries is set up in a way that promotes conflict of interest, research in this area should be of substantial interest to economists, marketers, and policy makers.…”