NDLI: Consumer Rating Dynamics

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Consumer Rating Dynamics

Content Provider	Scilit
Author	Schmidt, Peter Stenzel, André Wolf, Christoph
Copyright Year	2018
Description	Journal: SSRN Electronic Journal We consider dynamic price-setting by firms in the presence of rating systems and asymmetric information about product quality. We provide a general framework in which the price charged determines the characteristics of purchasing consumers. The price thus has two effects on future ratings: (i) a direct price effect on reviews if consumers evaluate a product relative to the purchase price, and (ii) an indirect selection effect through the determination of the set of reviewing consumers. Inference in our setup is characterized by a pair of inferred quality and purchasing consumers' tastes such that given the current price the aggregate rating is consistent and consumers' purchase decisions are individually rational. Sufficient conditions such that this inference is uniquely determined are obtained and the impact on the myopic and dynamic pricing incentives of a strategic firm are outlined. We provide empirical evidence for the relevance of our model and estimate the sign and magnitude of the effect of price on ratings using a unique dataset matching the price at which consumers purchased video games to their reviews. Finally, we show analytically for a class of additively separable utility and review functions that inference is correct in the long run provided that ratings aggregate all past reviews.
Related Links	https://www.econstor.eu/bitstream/10419/145694/1/VfS_2016_pid_6671.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3305217
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.3305217
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2018-12-21
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal Operations Research and Management Science Rating Systems Dynamic Pricing Asymmetric Information
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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