Template-Type: ReDIF-Paper 1.0
Title: Pricing for the Stars Dynamic Pricing in the Presence of Rating Systems
Author-Name: André Stenzel
Author-Email: andre.stenzel@uni-mannheim.de
Author-Name: Christoph Wolf
Author-Email: christoph.wolf@unibocconi.it
Author-Name: Peter Schmidt
Author-Email: peter.schmidt@quantco.com

Classification-JEL: D21, D82, L15
Keywords: Rating Systems, Dynamic Pricing, Asymmetric Information

Abstract: We study dynamic pricing in the presence of product ratings. A monopolist sells a good
of unknown quality to short-lived heterogeneous consumers who observe aggregate ratings
reflecting past reviews. Long-run outcomes depend on the sensitivity of the rating system
to incoming reviews and the degree to which reviews internalize the purchase price. When
internalization is high, low prices induce good reviews. For low internalization, good reviews
obtain with high prices via selection on consumer tastes. Sensitivity benefits the seller due
to easier ratings management, but may harm consumers by exacerbating upward pricing
pressure when internalization is low.

Note: 
Length: 35
Creation-Date: 2020-01
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp143
Handle: RePEc:bon:boncrc:CRCTR224_2020_143