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Pricing for the Stars - Dynamic Pricing in the Presence of Rating Systems

Author

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  • André Stenzel

  • Christoph Wolf

  • Peter Schmidt

Abstract

Maintaining good ratings increases the profits of sellers on online platforms. We analyze the role of strategic pricing for ratings management in a setting where a monopolist sells a good of unknown quality. Higher prices reduce the value for money, which on average worsens reviews. However, they also induce only consumers with a strong taste for the product to purchase, which on average improves reviews. We provide conditions under which the latter effect dominates so that ratings management leads to upward pressure on prices. This upward pressure increases in the sensitivity of the aggregate rating to incoming reviews. As a consequence, recent changes to rating systems may have harmed consumers by increasing long-run price levels.

Suggested Citation

  • André Stenzel & Christoph Wolf & Peter Schmidt, 2020. "Pricing for the Stars - Dynamic Pricing in the Presence of Rating Systems," CRC TR 224 Discussion Paper Series crctr224_2020_143v2, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2020_143v2
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp143
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    Cited by:

    1. Martin, Simon & Shelegia, Sandro, 2021. "Underpromise and overdeliver? - Online product reviews and firm pricing," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    2. Dongwook Shin & Stefano Vaccari & Assaf Zeevi, 2023. "Dynamic Pricing with Online Reviews," Management Science, INFORMS, vol. 69(2), pages 824-845, February.
    3. Yuxin Chen & Jinzhao Du & Ying Lei, 2025. "The Interactions of Customer Reviews and Price and Their Dual Roles in Conveying Quality Information," Marketing Science, INFORMS, vol. 44(1), pages 155-175, January.
    4. Selva, Alma Cortes & Deng, Yipu & Zhang, Danyang, 2025. "Covid19 and consumer animus towards Chinese products: Evidence from Amazon data," Journal of Economic Behavior & Organization, Elsevier, vol. 235(C).
    5. Johnen, Johannes & Ng, Robin, 2023. "Harvesting Ratings," CEPR Discussion Papers 18021, Centre for Economic Policy Research.
    6. Simone Robbiano & Gianluca Cerruti, 2026. "Assessing the Impact of Price-Matching Guarantees and Price Fluctuations on Consumer Feedback: Insights from the Online Consumer Electronics Market," Journal of Consumer Policy, Springer, vol. 49(1), pages 1-29, March.
    7. Qi Chen, 2025. "Dynamic Pricing in Online Education: A Stochastic Differential Game of Reference Price and Instructor Effects," Discrete Dynamics in Nature and Society, John Wiley & Sons, vol. 2025(1).
    8. Bharadwaj Kadiyala & Dongwook Shin, 2024. "Social Learning and Content Quality Under Polarization," Manufacturing & Service Operations Management, INFORMS, vol. 26(6), pages 2237-2255, November.
    9. Tommaso Bondi & Michelangelo Rossi, 2026. "Online Reviews: Information Content, Drivers, and Platform Design," CESifo Working Paper Series 12427, CESifo.
    10. Veronica Leoni & David Boto-Garcia & Roberto Patuelli, 2026. "The Timing of Spatial Competition: Price Interdependence Across Booking Horizons," Working Papers wp1225, Dipartimento Scienze Economiche, Universita' di Bologna.

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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