| Summary: | Empowered by information technology, modern consumers increasingly rely upon online word-of-mouth (WOM--e.g., product reviews) to guide their purchase decisions. This dissertation investigates how WOM information is processed by consumers and its downstream consequences. First, the value of specific types of word-of-mouth information (e.g., numeric ratings, text commentary, or both) was explored for making forecast. After proposing an anchoring-and-adjustment framework for the utilization of WOM to inform consumer forecasts, I support this framework with a series of experiments. Results demonstrate that the relative forecasting advantage of different information types is a function of the extent to which consumer and reviewer have similar product-level preferences ('source-receiver similarity'). Second, I investigate the process by which dispersion--the degree to which opinions are divided for a product or service--in WOM is interpreted. Using an attribution-based approach, I argue that the effect of WOM dispersion is dependent on the perceived cause of that dispersion, which is systematically related to perceptions of preference heterogeneity in a product category. For products for which preferences are expected to vary, dispersion is likely to be attributed to the reviewers rather than the product itself, and therefore tolerated. I provide evidence for my hypotheses in a series of experiments where WOM dispersion is manipulated and respondents make choices and indicate purchase intentions.
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