LAUSR

We propose and test an alternative diagnostic utility explanation for trends in customer ratings of products on online reviews/ratings sites. Ratings by prior customers provide key diagnostic information to help prospective customers in their purchase decision. The outcomes of these purchase decisions are reflected in the ratings posted by these later customers. Therefore, rating trends depend on the diagnostic utility of the ratings environment. We suggest that this diagnostic utility is a function of the degree of heterogeneity in the ratings environment and customer diagnostic ability. Using two data sets - from Landsend.com and from Amazon.com, we show a predominant increasing rating trend and support for our diagnostic utility explanation. Ratings show an increasing trend unless heterogeneity in the ratings environment increases and customer diagnostic ability decreases.