Manipulation Through Biased Product Reviews
The Journal of Industrial Economics, Forthcoming
50 Pages Posted: 14 Nov 2017 Last revised: 19 Jan 2020
Date Written: January 15, 2020
We study a signal-jamming model of product review manipulation in which rational consumers consult product reviews and price to better estimate a product's quality, and a firm, whose quality is either high or low, chooses its price and how much bias to insert into product reviews. We show that both firm types always exert positive effort to manipulate product reviews, and, depending on the equilibrium price level, one or both of them can increase its sales. When the high-type firm exerts more effort than the low-type, review manipulation benefits consumers by raising [lowering] their demand for the high-quality [low-quality] product.
Keywords: Information manipulation, Bayesian inference, product reviews, false advertising, hidden advertisement, price signaling, signal-jamming
JEL Classification: D8, K4, L1, L4
Suggested Citation: Suggested Citation