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. Recent studies have examined the direct effect of receiving incentives or introducing incentive policy on review writing behavior. However, since incentivized reviews are often only a small proportion of the overall reviews on a platform, it is important to understand whether their presence on the platform has spillover effects on the unincentivized reviews which are often in the majority. Using the state-of-the-art language model, Bidirectional Encoder Representations from Transformers (BERT) to identify incentivized reviews, a document embedding method, Doc2Vec to create matched pairs of Amazon and non-Amazon branded products, and a natural experiment caused by a policy change on Amazon.com in October 2016, we conduct a difference-in-differences analysis to identify the spillover effects of banning incentivized reviews on unincentivized reviews. Our results suggest that there are positive spillover effects of the ban on the review sentiment, length, helpfulness, and frequency, suggesting that the policy stimulates more reviews in the short-run and more positive, lengthy, and helpful reviews in the long run. Thus, we find that the presence of incentivized reviews on the platform poisons the well of reviews for unincentivized reviews.

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.