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Article: The Consequences of Rating Inflation on Platforms: Evidence from a Quasi-Experiment

TitleThe Consequences of Rating Inflation on Platforms: Evidence from a Quasi-Experiment
Authors
Keywordsonline ratings
online marketplace
quasi-experiment
economics of IS
Issue Date2022
Citation
Information Systems Research, 2022, Forthcoming How to Cite?
AbstractInformative online ratings enable digital platforms to reduce the search cost for buyers to find good sellers. However, rating inflation, a phenomenon in which average rating increases and rating variance across listings decreases, threatens the informativeness of ratings. We empirically identify the consequences of rating inflation by conducting a quasi-experiment with a digital platform that exogenously changed its rating display rule in a treated neighborhood, which resulted in rating inflation. Using a differences-in-differences approach, we find that platforms benefit from one aspect of rating inflation: user purchases and seller sales increase because of the increased average rating. However, they also face negative consequences: rating inflation causes a decrease in user trial and a greater concentration of sales among popular restaurants. Overall, our results illustrate the potential consequences of rating inflation that platforms need to consider when designing and managing their rating system.
Persistent Identifierhttp://hdl.handle.net/10722/313755
ISSN
2023 Impact Factor: 5.0
2023 SCImago Journal Rankings: 4.176
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorAziz, A-
dc.contributor.authorLi, H-
dc.contributor.authorTelang, R-
dc.date.accessioned2022-07-05T05:05:06Z-
dc.date.available2022-07-05T05:05:06Z-
dc.date.issued2022-
dc.identifier.citationInformation Systems Research, 2022, Forthcoming-
dc.identifier.issn1047-7047-
dc.identifier.urihttp://hdl.handle.net/10722/313755-
dc.description.abstractInformative online ratings enable digital platforms to reduce the search cost for buyers to find good sellers. However, rating inflation, a phenomenon in which average rating increases and rating variance across listings decreases, threatens the informativeness of ratings. We empirically identify the consequences of rating inflation by conducting a quasi-experiment with a digital platform that exogenously changed its rating display rule in a treated neighborhood, which resulted in rating inflation. Using a differences-in-differences approach, we find that platforms benefit from one aspect of rating inflation: user purchases and seller sales increase because of the increased average rating. However, they also face negative consequences: rating inflation causes a decrease in user trial and a greater concentration of sales among popular restaurants. Overall, our results illustrate the potential consequences of rating inflation that platforms need to consider when designing and managing their rating system.-
dc.languageeng-
dc.relation.ispartofInformation Systems Research-
dc.subjectonline ratings-
dc.subjectonline marketplace-
dc.subjectquasi-experiment-
dc.subjecteconomics of IS-
dc.titleThe Consequences of Rating Inflation on Platforms: Evidence from a Quasi-Experiment-
dc.typeArticle-
dc.identifier.emailLi, H: huil1@hku.hk-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1287/isre.2022.1134-
dc.identifier.hkuros333920-
dc.identifier.isiWOS:000810610200001-

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