Strategic Pricing and Ratings

Anton Sobolev (), Konrad Stahl (), Andre Stenzel and Christoph Wolf ()

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

Abstract: A seller serving two generations of short lived heterogeneous consumers sells a product under uncertain demand. We characterize the seller's optimal pricing, taking into account that the current period's price affects the information transmission to the next period consumers via consumer ratings. While the seller always prefers to generate more information, it is not necessarily in the consumers' interest. We characterize situations in which consumer surplus and welfare are decreasing in additional information. We provide conditions under which aggregate consumer surplus and welfare are lower with than without a rating system.

Keywords: Online Markets; Rating; Reputation (search for similar items in EconPapers)
JEL-codes: D83 L12 L13 L81 (search for similar items in EconPapers)
Pages: 28
Date: 2021-07
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2021_303

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