Ratings and Cooperative Information Transmission

Jordan Martel (), Edward Dickersin Van Wesep () and Robert Van Wesep ()
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Jordan Martel: Kelley School of Business, Indiana University Bloomington, Bloomington, Indiana 47405
Edward Dickersin Van Wesep: Leeds School of Business, University of Colorado Boulder, Boulder, Colorado 80309
Robert Van Wesep: Baltimore, Maryland

Management Science, 2022, vol. 68, issue 12, 9175-9197

Abstract: Researchers have often attributed discrete messages such as ratings to a difference in preferences between sender and receiver. By extending a standard model of information transmission, we show that discreteness can also arise when preferences are identical but misinterpretation is possible. Whereas discrete messages are less precise, they are easier to interpret. We provide predictions for the distribution of ratings. If we believe that an observed distribution results from cooperative behavior, the model provides a method for inferring the objectives of the sender and receiver. Ratings inflation and deflation arise as emergent properties of an optimal distribution.

Keywords: cheap talk; coarse; ratings (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:68:y:2022:i:12:p:9175-9197

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