Bad News Turned Good: Reversal under Censorship
- (pp. 506-60)
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 "naïve" 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.Citation
Smirnov, Aleksei, and Egor Starkov. 2022. "Bad News Turned Good: Reversal under Censorship." American Economic Journal: Microeconomics, 14 (2): 506-60. DOI: 10.1257/mic.20190379Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L15 Information and Product Quality; Standardization and Compatibility
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