Harvesting Ratings

Ratings play a crucial role in online marketplaces, shaping consumer decisions and firm strategies. We investigate how firms strategically use pricing to influence ratings, and how this undermines ratings as signals of product quality. We develop a two-period model of price competition between an established firm and a potentially high- or low-quality entrant, capturing the challenge high-quality newcomers face in building reputation. Consumers rate based on value-for-money, but cannot distinguish whether positive ratings result from genuine quality or discounted prices. Low-quality entrants take advantage of this and may offer low prices to harvest good ratings in the future, or mimic high prices to signal high quality. We show that ratings harvesting inflates positive ratings, reduces their informativeness, and exacerbates the cold-start problem, discouraging high-quality entry. Our results mirror empirical patterns and generate implications for how rating design affects market outcomes: reducing effort-costs to rate induces more but less-informative ratings, and discourages entry. Policy implications include discouraging excessive discounts for new sellers, incorporating price-paid into rating displays, and balancing rating effort-costs to preserve informativeness. While the effects of individual entrants’ harvesting may appear temporary, harvesting hinders high-quality entrants from building reputation, discouraging entry and causing lasting distortions.