Fake Detection as a Service: Implication of False Alarm in the Online Marketplace

Posted: 26 Nov 2020

See all articles by Hongseok Jang

Hongseok Jang

A.B. Freeman School of Business, Tulane University

Young Kwark

Warrington College of Business, University of Florida

Kyung Sung Jung

Warrington College of Business, University of Florida

Haldun Aytug

University of Florida - Warrington College of Business Administration

Date Written: September 11, 2020

Abstract

Almost all consumers use online reviews to decide which product to purchase among a plethora of products on an online marketplace. Though honest reviews are useful, fake or biased reviews pose numerous problems for an online marketplace and her stakeholders as they can misrepresent the quality of a product and mislead consumers. As a remedy, a marketplace can use a free add-on fake review detection service (i.e., fake detection as a service, FDAS), which provides adjusted rating scores, to help consumers separate the wheat from the chaff in a hodgepodge of gushing reviews and identify the true quality of products. One would expect that the consumers, the marketplace and honest sellers on the marketplace would benefit from an accurate FDAS. While we investigate whether and how this free service is effective for the marketplace and her stakeholders, we will show that the marketplace has an incentive to interfere and degrade the quality of such a service. We find that high quality sellers can largely benefit from the FDAS even when the FDAS is not very accurate. Paradoxically, when the FDAS conveys inaccurate information to consumers, the marketplace and sellers can benefit from the FDAS because inaccurate detection helps mitigate price competition between the sellers. This harms the consumers. Furthermore, we identify when and how the marketplace has an incentive to degrade the quality of the FDAS. Our results suggest that, under certain circumstances, a regulator needs to step in to protect the marketplace sellers and consumers.

Keywords: Fake reviews, Fake Detection Service, Online Marketplace, Competition

Suggested Citation

Jang, Hongseok and Kwark, Young and Jung, Kyung Sung and Aytug, Haldun, Fake Detection as a Service: Implication of False Alarm in the Online Marketplace (September 11, 2020). Available at SSRN: https://ssrn.com/abstract=3690734

Hongseok Jang (Contact Author)

A.B. Freeman School of Business, Tulane University ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Young Kwark

Warrington College of Business, University of Florida ( email )

PO Box 117165, 201 Stuzin Hall
Gainesville, FL 32610-0496
United States

Kyung Sung Jung

Warrington College of Business, University of Florida ( email )

Gainesville, FL 32611
United States

Haldun Aytug

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

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