Tag Archives: product-level

Do Incentivized Reviews Poison the Well? Evidence from a Natural Experiment at Amazon.com

Park, Jaecheol, Arslan Aziz, Gene Moo Lee. “Do Incentivized Reviews Poison the Well? Evidence from a Natural Experiment at Amazon.com”, Working Paper.

  • Presentations: UBC (2021), KrAIS (2021), WISE (2021), PACIS (2022), SCECR (2022), BU Platform (2022), CIST (2022), BIGS (2022)
  • Preliminary version in PACIS 2022 Proceedings

The rapid growth in e-commerce has led to a concomitant increase in consumers’ reliance on digital word-of-mouth to inform their choices. As such, there is an increasing incentive for sellers to solicit reviews for their products. The literature has examined the direct and indirect effects of incentivized reviews on subsequent organic reviews within consumers who received incentives. However, since incentivized reviews and reviewers are often only a small proportion of a review platform (only 1.2% in our sample), it is important to understand whether their presence and absence on the platform affect the organic reviews from other reviewers who have not received incentives, which are often in the majority. We theorize two underlying effects that incentivized reviews can generate on other organic reviews: the herding effect from imitating incentivized reviews and the disclosure effect from the increased trust or skepticism by explicit incentive disclosure statements. Those two effects make organic reviews either follow or deviate from incentivized reviews. Using Bidirectional Encoder Representations from Transformers (BERT) to identify incentivized reviews and a natural experiment caused by a policy change on Amazon.com in October 2016, we conduct difference-in-differences with propensity score matching analyses to identify the effects of banning incentivized reviews on organic reviews. Our results suggest the disclosure effects are salient: banning incentivized reviews has positive effects on organic reviews in terms of frequency, sentiment, length, image, and helpfulness. Moreover, we find that the presence of incentivized reviews has poisoned the well for organic reviews regardless of the incentivized review ratio and that the effect is heterogeneous to product quality uncertainty. Our findings contribute to the literature on online review and platform design and provide insights to platform managers.

Price Competition and Active or Inactive Consumer Search

Koh, Yumi, Gea M. Lee, Gene Moo Lee (2023) “Price Competition and Active or Inactive Consumer Search”. Working Paper. [Latest version: May 31, 2023] [SSRN]

We propose a price-competition model in which prices are dispersed and a fraction of consumers decide whether to make an immediate purchase without actively searching for prices or to search sequentially. We use an incomplete-information setting with heterogeneous production costs and information frictions:  rms’ production cost types are drawn from an interval and are privately observed. The model includes active or inactive consumer search as an equilibrium outcome and allows a competition-induced switch between the two outcomes. We study how firms and consumers interact in determining prices and making an active or inactive search when competition intensifies with more firms.