Working Paper, Department of Economics, Uppsala University 2013:6
Knowledge of how consumers react to different quality signals is fundamental for understanding how markets work. We study the online market- place for Android apps where we compare the causal effects on demand from two quality related signals; other consumers' stated and revealed preferences toward an app. Our main result is that consumers are much more responsive to other consumers' revealed preferences, compared to others' stated preferences. A 10 percentile increase in displayed average rating only increases downloads by about 3 percent, while a 10 percentile increase in displayed number of downloads increases downloads by about 20 percent.
peer effects observational learning stated preferences revealed preferences eWOM Google play Android apps regression discontinuity design instrumental variable analysis