The Market for Reviews: Strategic Behavior of Online Product Reviewers with Monetary Incentives
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The Market for Reviews: Strategic Behavior of Online Product Reviewers with Monetary Incentives Verena Dorner1 · Marcus Giamattei2,3 · Matthias Greiff4
Received: 22 October 2019 / Accepted: 1 June 2020 © The Author(s) 2020
Abstract Customer reviews reduce search cost and uncertainty about a product’s quality. Hence, the quantity and quality of reviews has positive impacts on purchase intentions, sales, and customer satisfaction. In order to increase review quality, retailers and online platforms employ different monetary incentives. We experimentally compare two different incentive schemes: an incentive scheme in which reviewers receive a flat salary, which is independent of review quality, and a tournament incentive scheme in which the reviewer who wrote the most helpful review receives a bonus payment. Helpfulness ratings are assigned by the other reviewers. In our experiment, adverse consequences arise under the tournament incentive scheme. Strategic considerations give rise to strategic downvoting, so that reviewers assign low helpfulness ratings to others’ reviews in order to maximize their expected payoffs. Review writing behavior remains unaffected: the tournament incentive scheme does not affect review quality. However, it does destroy the signaling power of helpfulness ratings.
V. Dorner [email protected] M. Giamattei [email protected] M. Greiff
[email protected] 1
Institute of Information Systems and Market Engineering, Karlsruhe Institute of Technology, Karlsruhe, Germany
2
Bard College Berlin, Berlin, Germany
3
Chair of Economic Theory, University of Passau, Passau, Germany
4
Chair of Behavioral Management and Economics, Clausthal University of Technology, Clausthal-Zellerfeld, Germany
K
Schmalenbach Bus Rev
Keywords Online product reviews · Strategic interaction · Platform markets · Public goods games · Product uncertainty · Tournaments JEL Codes C91 · D12 · D16 · D47 · M21
1 Introduction Nearly unlimited choice and pre-purchase uncertainty regarding a product’s quality has sparked considerable interest in developing ways of supporting customers’ decision making in online shopping (e.g., Brynjolfsson et al. 2003; Gill et al. 2012; Dimoka et al. 2012). To reduce uncertainty, retailers provide manufacturer-independent, customer-written reviews on their websites. Customer reviews are trusted (Bickart and Schindler 2001), increase sales and purchase intentions (Berger et al. 2010; Ghose and Ipeirotis 2011; Park et al. 2007; Chen et al. 2010; for a survey, see Dellarocas 2003), increase post-purchase satisfaction (Stephen et al. 2012), reduce return rates (Sahoo et al. 2018) and increase perceived website usefulness (Kumar and Benbasat 2006). Focusing on the book market, Reimers and Waldfogel (2020) estimate the yearly welfare effects of customer reviews to be $ 41 million for the U.S. Several companies have even built successful businesses around soliciting, collecting and distributing customer reviews to online retailers.1 Customers do not, however, consider a
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