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The Emperor has no clothes: measuring and explaining the impact of online communities on consumer markets

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The objective of this article is to examine how online communities affect the functioning of markets for durable goods with particular emphasis on markets that are both fragmented and diverse. Our thesis is that online communities have the potential to transform relatively inefficient fragmented markets into markets that are more efficient. This effect will manifest itself through the observed pricing of the goods in both standard commercial settings and in internet exchange institutions. A secondary effect of online communities should be to amplify the impact of quality (as perceived by the user) on market transactions. We conclude with an analysis of the foundations of credibility for user-generated content within online communities.

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en

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application/pdf

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http://flora.insead.edu/fichiersti_wp/inseadwp2008/2008-43.pdf

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Copyright INSEAD. All rights reserved