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When and Why Do Buyers Rate in Online Markets?

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  • Xiang Hui
  • Tobias J. Klein
  • Konrad O. Stahl

Abstract

Online ratings play an important role in many markets. We study the often disputed information content of these ratings, by proposing a reduced-form Bayesian model of the typical buyer’s rating decision. Our empirical evidence based on eBay raw data is in line with even intricate predictions from it. We thus have good reasons to calibrate the model to moments of the data. Our simulations suggest that the rating record reveals the seller’s type after about 100 transactions, or 65-70 ratings.

Suggested Citation

  • Xiang Hui & Tobias J. Klein & Konrad O. Stahl, 2022. "When and Why Do Buyers Rate in Online Markets?," CESifo Working Paper Series 9562, CESifo.
    • Handle: RePEc:ces:ceswps:_9562
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    References listed on IDEAS

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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. Andrey Fradkin & David Holtz, 2023. "Do Incentives to Review Help the Market? Evidence from a Field Experiment on Airbnb," Marketing Science, INFORMS, vol. 42(5), pages 853-865, September.

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    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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