Fiche du document
2022
- handle: 10670/1.e7kl52
- hal: hal-04465801
Mots-clés
Product reviews Information design Firm dynamics Social learning Ergodic analysis Directed search D - Microeconomics/D.D2 - Production and Organizations/D.D2.D21 - Firm Behavior: Theory D - Microeconomics/D.D8 - Information, Knowledge, and Uncertainty/D.D8.D82 - Asymmetric and Private Information • Mechanism Design D - Microeconomics/D.D8 - Information, Knowledge, and Uncertainty/D.D8.D83 - Search • Learning • Information and Knowledge • Communication • Belief • Unawareness L - Industrial Organization/L.L1 - Market Structure, Firm Strategy, and Market Performance/L.L1.L11 - Production, Pricing, and Market Structure • Size Distribution of Firms L - Industrial Organization/L.L1 - Market Structure, Firm Strategy, and Market Performance/L.L1.L15 - Information and Product Quality • Standardization and Compatibility L - Industrial Organization/L.L8 - Industry Studies: Services/L.L8.L86 - Information and Internet Services • Computer SoftwareSujets proches
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Nikhil Vellodi, « Ratings Design and Barriers to Entry », HAL-SHS : économie et finance, ID : 10670/1.e7kl52
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Résumé
I study the impact of consumer reviews on the incentives for firms to participate in the market through the lens of ratings design. Firms produce goods of heterogeneous, unknown quality that is gradually revealed via consumer reviews, and face both entry and exit decisions. A platform combines past reviews to construct firm-specific ratings that help guide consumer search. When the platform integrates all reviews into ratings, consumers form queues at the highest-rated firms. This demand profile induces a convex-concave continuation value for firms as a function of ratings. While firms thus prefer more feedback when struggling and less feedback when established, equilibrium induces the reverse allocation. The main insight of the paper is that suppressing the reviews of highly-rated firms stimulates entry and improves consumer welfare.