IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v69y2023i2p904-921.html
   My bibliography  Save this article

Strategic Reviews

Author

Listed:
  • Mohamed Mostagir

    (Technology and Operations, University of Michigan Ross School of Business, Ann Arbor, Michigan 48109)

  • James Siderius

    (Laboratory for Information and Decision Systems, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

Abstract

The impact of product reviews on consumer purchasing behavior is empirically well documented. This can create perverse incentives for firms to offer reviewers side payments (“bribes”) in exchange for biased reviews for their products. The presence of bribes distorts the information in reviews and leads to detrimental effects on consumer utility. This paper builds a two-sided reputation model where a reviewer can inflate her reviews in exchange for bribes. If the reviewer accepts bribes and misrepresents her reviews, then she builds her reputation as an inaccurate reviewer and makes consumers less likely to follow her recommendations. This in turn makes firms no longer interested in offering her a bribe. Can the reviewer retain influence over consumers’ purchasing decisions while simultaneously accepting bribes and misrepresenting her reviews? We provide a characterization of the environments that allow this kind of manipulation and show that regulatory policies that aim to reduce bribes can lead to undesirable outcomes. Finally, we show that eliminating bribes from the market can increase the welfare of all market participants, even for those firms who would have otherwise bribed in exchange for more favorable reviews.

Suggested Citation

  • Mohamed Mostagir & James Siderius, 2023. "Strategic Reviews," Management Science, INFORMS, vol. 69(2), pages 904-921, February.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:2:p:904-921
    DOI: 10.1287/mnsc.2022.4376
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2022.4376
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.2022.4376?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Matthew Mitchell, 2021. "Free ad(vice): internet influencers and disclosure regulation," RAND Journal of Economics, RAND Corporation, vol. 52(1), pages 3-21, March.
    2. Dye, Ra, 1985. "Disclosure Of Nonproprietary Information," Journal of Accounting Research, Wiley Blackwell, vol. 23(1), pages 123-145.
    3. Elena Belavina & Simone Marinesi & Gerry Tsoukalas, 2020. "Rethinking Crowdfunding Platform Design: Mechanisms to Deter Misconduct and Improve Efficiency," Management Science, INFORMS, vol. 66(11), pages 4980-4997, November.
    4. Li Chen & Yiangos Papanastasiou, 2021. "Seeding the Herd: Pricing and Welfare Effects of Social Learning Manipulation," Management Science, INFORMS, vol. 67(11), pages 6734-6750, November.
    5. David A. Reinstein & Christopher M. Snyder, 2005. "The Influence Of Expert Reviews On Consumer Demand For Experience Goods: A Case Study Of Movie Critics," Journal of Industrial Economics, Wiley Blackwell, vol. 53(1), pages 27-51, March.
    6. Drew Fudenberg & David K. Levine, 2008. "Reputation And Equilibrium Selection In Games With A Patient Player," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 7, pages 123-142, World Scientific Publishing Co. Pte. Ltd..
    7. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-483, December.
    8. Chrysanthos Dellarocas, 2006. "Strategic Manipulation of Internet Opinion Forums: Implications for Consumers and Firms," Management Science, INFORMS, vol. 52(10), pages 1577-1593, October.
    9. Ozan Candogan & Kimon Drakopoulos, 2020. "Optimal Signaling of Content Accuracy: Engagement vs. Misinformation," Operations Research, INFORMS, vol. 68(2), pages 497-515, March.
    10. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
    11. Di Tella, Rafael & Schargrodsky, Ernesto, 2003. "The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires," Journal of Law and Economics, University of Chicago Press, vol. 46(1), pages 269-292, April.
    12. Roman Inderst & Marco Ottaviani, 2012. "Competition through Commissions and Kickbacks," American Economic Review, American Economic Association, vol. 102(2), pages 780-809, April.
    13. Heski Bar-Isaac Jr. & Joyee Deb Jr., 2014. "(Good and Bad) Reputation for a Servant of Two Masters," American Economic Journal: Microeconomics, American Economic Association, vol. 6(4), pages 293-325, November.
    14. Yiangos Papanastasiou, 2020. "Fake News Propagation and Detection: A Sequential Model," Management Science, INFORMS, vol. 66(5), pages 1826-1846, May.
    15. Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
    16. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. S. Nageeb Ali & Gregory Lewis & Shoshana Vasserman, 2019. "Voluntary Disclosure and Personalized Pricing," NBER Working Papers 26592, National Bureau of Economic Research, Inc.
    2. Francesco Sangiorgi & Chester Spatt, 2017. "Opacity, Credit Rating Shopping, and Bias," Management Science, INFORMS, vol. 63(12), pages 4016-4036, December.
    3. Antoine Faure‐Grimaud & Eloïc Peyrache & Lucía Quesada, 2009. "The ownership of ratings," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 234-257, June.
    4. Harbaugh, Richmond & To, Theodore, 2020. "False modesty: When disclosing good news looks bad," Journal of Mathematical Economics, Elsevier, vol. 87(C), pages 43-55.
    5. S Nageeb Ali & Greg Lewis & Shoshana Vasserman, 2023. "Voluntary Disclosure and Personalized Pricing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(2), pages 538-571.
    6. Ginger Zhe Jin & Andrew Kato & John A. List, 2010. "That’S News To Me! Information Revelation In Professional Certification Markets," Economic Inquiry, Western Economic Association International, vol. 48(1), pages 104-122, January.
    7. Shuo Liu & Dimitri Migrow, 2019. "Designing organizations in volatile markets," ECON - Working Papers 319, Department of Economics - University of Zurich.
    8. Alexander E. Saak, 2017. "The Value of Delegated Quality Control," Journal of Industrial Economics, Wiley Blackwell, vol. 65(2), pages 309-335, June.
    9. Xu Jiang & Ying Xue, 2023. "Morale, performance and disclosure," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(1), pages 5-23, February.
    10. Gabriele Gratton & Richard Holden & Anton Kolotilin, 2015. "Timing Information Flows," Discussion Papers 2015-16, School of Economics, The University of New South Wales.
    11. Paugam, Luc, 2011. "Valorisation et reporting du goodwill : enjeux théoriques et empiriques," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/8007 edited by Casta, Jean-François.
    12. Ali, Ashiq & Klasa, Sandy & Yeung, Eric, 2014. "Industry concentration and corporate disclosure policy," Journal of Accounting and Economics, Elsevier, vol. 58(2), pages 240-264.
    13. Wong, Tsz-Ning & Yang, Lily Ling, 2021. "Dynamic expert incentives in teams," Games and Economic Behavior, Elsevier, vol. 125(C), pages 27-47.
    14. Peter M. Clarkson & Jennifer L. Kao & Gordon D. Richardson, 1994. "The Voluntary Inclusion of Forecasts in the MD&A Section of Annual Reports," Contemporary Accounting Research, John Wiley & Sons, vol. 11(1), pages 423-450, June.
    15. Tianle Song, 2022. "Quality Disclosure and Product Selection," Journal of Industrial Economics, Wiley Blackwell, vol. 70(2), pages 323-346, June.
    16. Yan Li & Yutao Li, 2020. "The effect of trade secrets protection on disclosure of forward‐looking financial information," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(3-4), pages 397-437, March.
    17. Winand Emons & Claude Fluet, 2019. "Strategic communication with reporting costs," Theory and Decision, Springer, vol. 87(3), pages 341-363, October.
    18. Praveen Kumar & Nisan Langberg & K. Sivaramakrishnan, 2012. "Voluntary Disclosures, Corporate Control, and Investment," Journal of Accounting Research, Wiley Blackwell, vol. 50(4), pages 1041-1076, September.
    19. Evans, R., Reiche, S. & Reiche, S., 2022. "When is a Contrarian Adviser Optimal?," Cambridge Working Papers in Economics 2222, Faculty of Economics, University of Cambridge.
    20. Mahoney, Lois S. & Thorne, Linda & Cecil, Lianna & LaGore, William, 2013. "A research note on standalone corporate social responsibility reports: Signaling or greenwashing?," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 24(4), pages 350-359.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:69:y:2023:i:2:p:904-921. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.