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Strategic Pricing and Ratings

Author

Listed:
  • Anton Sobolev
  • Konrad Stahl
  • André Stenzel
  • Christoph Wolf

Abstract

A seller serving two generations of short lived heterogeneous consumers sells a product under uncertain demand. We characterize the seller's optimal pricing, taking into account that the current period's price affects the information transmission to the next period consumers via consumer ratings. While the seller always prefers to generate more information, it is not necessarily in the consumers' interest. We characterize situations in which consumer surplus and welfare are decreasing in additional information. We provide conditions under which aggregate consumer surplus and welfare are lower with than without a rating system.

Suggested Citation

  • Anton Sobolev & Konrad Stahl & André Stenzel & Christoph Wolf, 2021. "Strategic Pricing and Ratings," CRC TR 224 Discussion Paper Series crctr224_2021_303, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2021_303
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp303
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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).

    More about this item

    Keywords

    Online Markets; Rating; Reputation;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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