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Experimenting with incentives for information transmission: Quantity versus quality

Jonathan Lafky and Alistair J. Wilson

Journal of Economic Behavior & Organization, 2020, vol. 169, issue C, 314-331

Abstract: People share their experiences of goods and services online through reviews, ratings and endorsements on social networks, potentially generating welfare-improving information that can help subsequent consumers make better, more informed decisions. While the economics literature has focused on questions of alignment and the intensive quality of provided information, another tension is extensive: in the absence of an incentive, many might choose not to provide information at all. We study three different incentives that encourage information transmission on the extensive margin, examining the tradeoffs between the quality and quantity of information. Our findings indicate substantial efficiency gains are possible relative to no incentives, even when the incentives damage the preference alignment between those sending and receiving information. In particular, our results suggest that a partially aligned incentive (similar to a referral or sales commission) can encourage the provision of information while not producing substantial reductions in quality.

Keywords: Information transmission; rating incentives; sales commissions (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:169:y:2020:i:c:p:314-331

DOI: 10.1016/j.jebo.2019.11.026

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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