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

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.