ONLINE REVIEWS AND PRODUCT QUALITY IN THE WEB HOSTING INDUSTRY
Consumers purchasing Internet-based services from companies that lack physical presences have a unique problem. They do not have access to the information that they require in order to discern the quality of the company's products. In lieu of alternatives, they may turn to publicly available reviews from other consumers to aid them in coming to a decision regarding product quality. Using hedonic regression analysis, this study examines the potential for online reviews to function as a proxy for product quality. Estimating our initial hedonic model using OLS reveals that the number of negative reviews posted for a company is associated with decreased prices. Estimating a new hedonic model that controls for economies of scale provides the same conclusion, though the effect is slightly decreased. The results of our estimates provide statistical support of our initial hypothesis.