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Bad News Turned Good: Reversal under Censorship

Author

Listed:
  • Aleksei Smirnov
  • Egor Starkov

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 "naïve" 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 seller to use them to signal his product's quality to rational consumers.

Suggested Citation

  • Aleksei Smirnov & Egor Starkov, 2022. "Bad News Turned Good: Reversal under Censorship," American Economic Journal: Microeconomics, American Economic Association, vol. 14(2), pages 506-560, May.
    • Handle: RePEc:aea:aejmic:v:14:y:2022:i:2:p:506-60
    DOI: 10.1257/mic.20190379
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    Cited by:

    1. Alexei Parahonyak & Nick Vikander, 2024. "Strategic Use of Product Delays to Shape Word-of-Mouth Communication," Economics Series Working Papers 1032, University of Oxford, Department of Economics.
    2. Elina Ishmukhametova & Marina Sandomirskaia, 2023. "The Problem Of Reputation Reliability In Online Freelance Markets," HSE Working papers WP BRP 260/EC/2023, National Research University Higher School of Economics.
    3. Casner, Ben, 2020. "Seller curation in platforms," International Journal of Industrial Organization, Elsevier, vol. 72(C).
    4. Boris Knapp, 2021. "Fake Reviews and Naive Consumers," Vienna Economics Papers vie2102, University of Vienna, Department of Economics.
    5. Smirnov, Aleksei & Starkov, Egor, 2025. "Designing social learning," European Economic Review, Elsevier, vol. 178(C).
    6. Matveenko, Andrei & Starkov, Egor, 2023. "Sparking curiosity or tipping the scales? Targeted advertising with consumer learning," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 172-192.
    7. Starkov, Egor, 2023. "Only time will tell: Credible dynamic signaling," Journal of Mathematical Economics, Elsevier, vol. 109(C).
    8. Boris Knapp, 2021. "Fake Reviews and Naive Consumers," Vienna Economics Papers 2102, University of Vienna, Department of Economics.
    9. Søren Johansen & Anders Ryghn Swensen, 2021. "Adjustment coefficients and exact rational expectations in cointegrated vector autoregressive models," CREATES Research Papers 2021-10, Department of Economics and Business Economics, Aarhus University.
    10. Schmitt, Stefanie Y. & Bruckner, Dominik, 2023. "Unaware consumers and disclosure of deficiencies," Games and Economic Behavior, Elsevier, vol. 142(C), pages 1018-1042.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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