Quantifying the Impact of Sales Rankings on Consumer Demand : The Case of Opening-Week Box Office Ranking for Movies

Consumers often rely on product rankings to make purchase decisions. Using data from China’s movie market, we examined the demand effects of opening-week box office rankings. We allowed two potential channels through which such rankings affect consumer demand: quality signaling and information diffusion. The results show that a higher rank in the opening-week box office leads to both better quality perception and more positive information diffusion, which together lead to higher total box office revenues. The impacts of such rankings are heterogeneous as they are stronger for movies from domestic and non-major studios. The counterfactual analysis shows that the primary channel of the ranking effect is through quality signaling but not information diffusion. The opening-week box office ranking has market-expansion effects on the overall movie market. However, the distribution of the ranking’s impacts across individual movies is top biased in that only the very top-ranked movies (i.e., No. 1 and 2 ranked movies) benefit from the opening-week box office ranking, whereas all others are negatively affected