Bad News Turned Good: Reversal Under Censorship

Abstract

Sellers often have the power to censor the reviews of their products. We explore the effect of these censorship policies in markets where some consumers are unaware of possible censorship. We find that if the share of such "naive" consumers is not too large, then rational consumers treat any bad review that is revealed in equilibrium as good news about product quality. This makes bad reviews worth revealing and allows the high-type seller to use them as a costly signal of his product's quality to rational consumers.

Fake Reviews

“…The literature includes models of manipulation/elimination of existing reviews such as Aköz, Arbatl and Çelik (2018) and Smirnov and Strakov (2018), in which the …rm does not produce fake reviews but rather alters or eliminates existing ones. Such setups apply only to reviews on a business'own site, while we focus on mass review platforms such as Yelp or TripAdvisor where existing reviews cannot be altered by an interested party, but only by the platform itself.…”