“Do I Follow My Friends or the Crowd? Information Cascades in Online Movie Ratings”
https://repository.upenn.edu/cgi/viewcontent.cgi?article=1324&context=marketing_papers
This article, titled “Do I Follow My Friends or the Crowd? Information Cascades in Online Movie Ratings”, analyzes the different factors that influence an online movie rating, in particular friends and crowd influence. This analysis states that on average, if initial reviews for a movie are high, later reviews also tend to be high. However, the impact of crowd ratings on one’s personal rating decreases as the ratings of one’s friends increases.The conclusion of this paper is that social imitation and network effect causes online ratings to be ineffective/inefficient in representing the true value of a product, in this case a movie.
This paper is related to the concepts of information cascade and network effects. An information cascade is formed when people begin to make decisions based on the consensus of the crowd rather than based on their own private information. However, the movie-rating information cascade is a little more complicated: a person will listen to the crowd, but only to a certain extent. As they receive more information from friends, they will listen to their friends more than the crowd. Network effects are present in this situation because it demonstrates the rich-get-richer effect. Movies with initial high ratings tend to get high ratings later on as well, leading to a small number of very highly-rated movies. The high ratings of these movies will compel more people to watch them, leading to blockbuster successes.