Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2013:6: Demand effects of consumers’ stated and revealed preferences

Per Engström () and Eskil Forsell ()
Additional contact information
Per Engström: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Eskil Forsell: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: 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.

Keywords: peer effects; observational Learning; stated preferences; revealed preferences; eWOM; Google play; Android apps; regression discontinuity design; instrumental variable analysis

JEL-codes: C21; C26; D83; M31

27 pages, April 19, 2013

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