Bad News Turned Good: Reversal under Censorship
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Aleksei Smirnov
-
Egor Starkov
- American Economic Journal: Microeconomics (Forthcoming)
Abstract
Sellers often have the power to censor the reviews of their products. We explore the effect of these censorship policies in markets
where some consumers are unaware of possible censorship. We
find that if the share of such "naive" consumers is not too large,
then rational consumers treat any bad review that is revealed in
equilibrium as good news about product quality. This makes bad
reviews worth revealing and allows the seller to use them to signal
his product's quality to rational consumers.
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