A Matter of Taste: The Negative Welfare Effect of Expert Judgments

Nicolas Lagios and Pierre-Guillaume Méon

No 23-009, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: Expert judgments may increase or decrease consumer welfare depending on experts’ ability to redirect consumers toward goods they enjoy. Leveraging the discontinuity created by the attribution of the Booker Prize, a leading literary award, we confirm that the prize attracts readers to consumption. We then investigate how it affects consumer surplus. We measure consumer ex post satisfaction from reading a book by the sentiment and the rating of the reviews posted on Amazon. We show that the Booker reduces satisfaction and that this negative effect is driven by a misalignment between the tastes of the jury and those of consumers. We quantify the associated loss in welfare by calibrating a structural model of demand. We find that the prize reduces consumer surplus by USD135,000 annually, meaning that a consumer buying a Booker Prize-winning book experiences a loss in surplus of 4% of the average price of a book.

Keywords: Awards; Prizes; Welfare; Sales; Experts; Books; Consumer Surplus (search for similar items in EconPapers)
JEL-codes: D12 D83 L15 L82 Z11 (search for similar items in EconPapers)
Date: 2023-09-30
New Economics Papers: this item is included in nep-cul and nep-mic
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Working Paper: A Matter of Taste: The Negative Welfare Effect of Expert Judgments (2024)
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