Information Cascades and Online Shopping

Abstract

This study investigates and compares the impact of information cascades on online shopping behaviors in China and the United States. In particular, the role of information cascades in moderating the effect of price discounts has been examined and cross-culturally compared. To do so, two 122-day panel data sets were collected from two separate online flagship stores selling a same brand of sports shoes on Tmall.com and eBay.com. The results show that product ranking positively influences the product sales in the online shopping market, which follows the predicted results achieved in information cascades studies. Moreover, information cascades are more prominent for Chinese consumers than for American consumers. The findings also suggest that information cascades have moderated the impact of price discounts on online purchase behavior. However, this moderating effect is also influenced by cultural orientation of online customers. The findings are important from not only a theoretical perspective but also a managerial one.