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Ratings and Cooperative Information Transmission

Author

Listed:
  • Jordan Martel

    (Kelley School of Business, Indiana University Bloomington, Bloomington, Indiana 47405)

  • Edward Dickersin Van Wesep

    (Leeds School of Business, University of Colorado Boulder, Boulder, Colorado 80309)

  • Robert Van Wesep

    (Baltimore, Maryland)

Abstract

Researchers have often attributed discrete messages such as ratings to a difference in preferences between sender and receiver. By extending a standard model of information transmission, we show that discreteness can also arise when preferences are identical but misinterpretation is possible. Whereas discrete messages are less precise, they are easier to interpret. We provide predictions for the distribution of ratings. If we believe that an observed distribution results from cooperative behavior, the model provides a method for inferring the objectives of the sender and receiver. Ratings inflation and deflation arise as emergent properties of an optimal distribution.

Suggested Citation

  • Jordan Martel & Edward Dickersin Van Wesep & Robert Van Wesep, 2022. "Ratings and Cooperative Information Transmission," Management Science, INFORMS, vol. 68(12), pages 9175-9197, December.
    • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:12:p:9175-9197
    DOI: 10.1287/mnsc.2022.4297
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    References listed on IDEAS

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    Keywords

    cheap talk; coarse; ratings;
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