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The Superiority of Tough Reviewers in a Model of Simultaneous Sales

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Author Info

  • Gill, D.
  • Sgroi, D.

Abstract

This paper considers the impact of reviewers on the sale of a product of unknown quality. Sales occur simultaneously after an initial review by an unbiased, pessimistic or optimistic reviewer and we examine the impact on sales in each case. We find that counter-intuitively a pessimistic reviewer is best for the firm's profits regardless of the quality of the product. An endorsement by such a pessimist provides an excellent signal of the product's quality, while consumers expect the reviewer to fail to endorse, so receiving no endorsement will not impact too heavily on the firm's expected profits. This asymmetric impact provides a strong explanation for the stylized fact that reviewers are often viewed as being very critical.

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File URL: http://www.econ.cam.ac.uk/dae/repec/cam/pdf/cwpe0335.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0335.

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Length: 32
Date of creation: Jul 2003
Date of revision:
Handle: RePEc:cam:camdae:0335

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Web page: http://www.econ.cam.ac.uk/index.htm

Related research

Keywords: private information; reviewers; bias; simultaneous sales; marketing;

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Cited by:
  1. Josh Lerner & Jean Tirole, 2006. "A Model of Forum Shopping," American Economic Review, American Economic Association, vol. 96(4), pages 1091-1113, September.
  2. David Gill & Daniel Sgroi, 2005. "Sequential Decisions with Tests," Economics Series Working Papers 242, University of Oxford, Department of Economics.
  3. Farhi, Emmanuel & Lerner, Josh & Tirole, Jean, 2008. "Fear of Rejection? Tiered Certification and Transparency," IDEI Working Papers 534, Institut d'Économie Industrielle (IDEI), Toulouse, revised Sep 2012.

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