Pricing for the Stars Dynamic Pricing in the Presence of Rating Systems

Andre Stenzel, Christoph Wolf () and Peter Schmidt ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We study dynamic pricing in the presence of product ratings. A monopolist sells a good of unknown quality to short-lived heterogeneous consumers who observe aggregate ratings reflecting past reviews. Long-run outcomes depend on the sensitivity of the rating system to incoming reviews and the degree to which reviews internalize the purchase price. When internalization is high, low prices induce good reviews. For low internalization, good reviews obtain with high prices via selection on consumer tastes. Sensitivity benefits the seller due to easier ratings management, but may harm consumers by exacerbating upward pricing pressure when internalization is low.

Keywords: Rating Systems; Dynamic Pricing; Asymmetric Information (search for similar items in EconPapers)
JEL-codes: D21 D82 L15 (search for similar items in EconPapers)
Pages: 35
Date: 2020-01
New Economics Papers: this item is included in nep-com, nep-ind and nep-ore
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Citations: View citations in EconPapers (2)

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Working Paper: Pricing for the Stars - Dynamic Pricing in the Presence of Rating Systems (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2020_143

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