Disclosure in Incentivized Reviews: Does It Protect Consumers?

Sungsik Park (), Woochoel Shin () and Jinhong Xie ()
Additional contact information
Sungsik Park: Darla Moore School of Business, University of South Carolina, Columbia, South Carolina 29201
Woochoel Shin: Warrington College of Business, University of Florida, Gainesville, Florida 32611
Jinhong Xie: Warrington College of Business, University of Florida, Gainesville, Florida 32611

Management Science, 2023, vol. 69, issue 11, 7009-7021

Abstract: The well-documented rating inflation of incentivized reviews (IRs) can mislead consumers into choosing a product that they would otherwise not buy. To protect consumers from this undesirable influence, the U.S. Federal Trade Commission recommends that reviewers conspicuously disclose any material connection they may have with sellers. In theory, such disclosures safeguard consumers by motivating reviewers to be truthful and inducing consumers to discount inflated IR ratings. Our research finds, however, that IR disclosure accomplishes neither. Specifically, our empirical analysis of consumer reviews on Amazon reveals that, even with disclosure, (1) rating inflation of IRs remains, and (2) this inflation boosts sales at consumers’ expense. Finally, we propose an alternative approach to eliminate rating inflation of IRs and empirically demonstrate its effectiveness. These findings have important implications for consumers, firms, and ongoing policy discussions around IRs.

Keywords: information disclosure; consumer protection; online reviews; incentivized reviews; user-generated information; incentive compatibility; sponsorship disclosure (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2023.00930 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:11:p:7009-7021

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().