Seller Manipulation of Consumer Reviews under Competition
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Consumer ratings in online marketplaces not only help consumers learn about the quality of sellers’ products and services, but also shape the competition among those sellers. Some sellers, taking the advantage of anonymity of contributing consumers, forge consumer reviews to boost their own ratings. This research uses a game theoretical model to explore the incentive mechanism of the manipulation of consumer reviews in a competitive environment. By examining the interaction between price competition and review manipulation, this paper shows that although forging consumer reviews can improve their perceived quality, high-quality sellers do not do so because they incur higher marginal costs. Only low-quality sellers fake consumer reviews. However, the manipulation of consumer ratings does not change the rankings of the perceived quality of sellers. This paper also shows how market characteristics, including consumer quality preference and manipulation cost influence the manipulation of consumer reviews.
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