Strategic Reviews

Mohamed Mostagir () and James Siderius ()
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Mohamed Mostagir: Technology and Operations, University of Michigan Ross School of Business, Ann Arbor, Michigan 48109
James Siderius: Laboratory for Information and Decision Systems, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139

Management Science, 2023, vol. 69, issue 2, 904-921

Abstract: The impact of product reviews on consumer purchasing behavior is empirically well documented. This can create perverse incentives for firms to offer reviewers side payments (“bribes”) in exchange for biased reviews for their products. The presence of bribes distorts the information in reviews and leads to detrimental effects on consumer utility. This paper builds a two-sided reputation model where a reviewer can inflate her reviews in exchange for bribes. If the reviewer accepts bribes and misrepresents her reviews, then she builds her reputation as an inaccurate reviewer and makes consumers less likely to follow her recommendations. This in turn makes firms no longer interested in offering her a bribe. Can the reviewer retain influence over consumers’ purchasing decisions while simultaneously accepting bribes and misrepresenting her reviews? We provide a characterization of the environments that allow this kind of manipulation and show that regulatory policies that aim to reduce bribes can lead to undesirable outcomes. Finally, we show that eliminating bribes from the market can increase the welfare of all market participants, even for those firms who would have otherwise bribed in exchange for more favorable reviews.

Keywords: strategic communication; reputation; product reviews; economic decision making (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:2:p:904-921

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