Expert Product Reviews and Conflict of Interest

Abstract

Many firms that produce expert product reviews have a vested interest in increased consumption of the products they review. The classic example is the Michelin Guide, which reviews restaurants, originally conceived to stimulate usage of automobiles and therefore also demand for automobile-related goods and services. The result is a conflict of interest; such firms have financial incentive to give better reviews than products merit. I compare video game reviews from two sources: one a video game magazine owned by a game retailer and the other a game website that does not sell games. The goal of the research is to evaluate to what extent, if any, the retailer-owned outlet inflates its reviews in order to boost sales. Results show no evidence of seasonal or cyclical effects. However, there is some evidence of increased inflation in periods shortly following the release of a game's corresponding piece of hardware. Other literature on this industry finds that reviews have the largest effect on the sales of low-quality games, and I find evidence of review inflation for these games. These results are consistent with theoretical predictions for a firm that optimizes the trade-off between sales revenue and the reputational costs associated with biasing reviews.

Keywords: Product reviews, Media bias, Regulatory capture, Video games

JEL Classification: L14, L15, D21, D22, D62