The Market for Fake Reviews

He, Sherry and Hollenbeck, Brett and Proserpio, Davide (2021): The Market for Fake Reviews.

Abstract

We study the market for fake product reviews on Amazon.com. These reviews are purchased in large private internet groups on Facebook and other sites. We hand-collect data on these markets to characterize the types of products that buy fake reviews and then collect large amounts of data on the ratings and reviews posted on Amazon for these products, as well as their sales rank, advertising, and pricing behavior. We use this data to assess the costs and benefits of fake reviews to sellers and evaluate the degree to which they harm consumers. The theoretical literature on review fraud shows that there exist conditions when they harm consumers and other conditions where they function as simply another type of advertising. Using detailed data on product outcomes before and after they buy fake reviews we can directly determine if these are low-quality products using fake reviews to deceive and harm consumers or if they are possibly high-quality products who solicit reviews to establish reputations. We find that a wide array of products purchase fake reviews including products with many reviews and high average ratings. Soliciting fake reviews on Facebook leads to a significant increase in average rating and sales rank, but the effect disappears after roughly one month. After firms stop buying fake reviews their average ratings fall significantly and the share of one-star reviews increases significantly, indicating fake reviews are mostly used by low quality products and are deceiving and harming consumers. We also observe that Amazon deletes large numbers of reviews and we document their deletion policy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Online platforms, consumer protection, e-commerce, word-of-mouth
• Subjects: K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L15 - Information and Product Quality ; Standardization and Compatibility; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; L - Industrial Organization > L8 - Industry Studies: Services > L81 - Retail and Wholesale Trade ; e-Commerce; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics > M21 - Business Economics; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M31 - Marketing

References

Ananthakrishnan, U., Li, B., and Smith, M. (2020). A tangled web: Should online review portals display fraudulent reviews? Information Systems Research, forthcoming.

Anderson, E. and Simester, D. (2014). Reviews without a purchase: Low ratings, loyal customers, and deception. Journal of Marketing Research, 51.

Cabral, L. and Hortacsu, A. (2010). The Dynamics Of Seller Reputation: Evidence From Ebay. Journal of Industrial Economics, 58(1):54–78.

Chiou, L. and Tucker, C. (2018). Fake news and advertising on social media: A study of the anti-vaccination movement.

Dellarocas, C. (2006). Strategic manipulation of internet opinion forums: Implications for consumers and firms. Management science, 52(10):1577–1593.

Einav, L., Farronato, C., and Levin, J. (2016). Peer-to-peer markets. Annual Review of Economics, 8(1):615–635.

Glazer, J., Herrera, H., and Perry, M. (2020). Fake reviews. The Economic Journal, forthcoming.

Gordon, B., Jerath, K., Katona, Z., Narayanan, S., Shin, J., and Wilbur, K. (2021). Ineffi- ciencies in digital advertising markets. Journal of Marketing, 85(1):7–25.

Hollenbeck, B. (2018). Online reputation mechanisms and the decreasing value of chain affiliation. Journal of Marketing Research, 55(5):636–654.

Hollenbeck, B., Moorthy, S., and Proserpio, D. (2019). Advertising strategy in the presence of reviews: An empirical analysis. Marketing Science, pages 793–811.

Li, X., Bresnahan, T. F., and Yin, P.-L. (2016). Paying incumbents and customers to enter an industry: Buying downloads.

Luca, M. and Zervas, G. (2016). Fake it till you make it: Reputation, competition, and yelp review fraud. Management Science, 62(12):3412–3427.

Mayzlin, D., Y., D., and Chevalier, J. (2014). Promotional Reviews: An Empirical Investigation of Online Review Manipulation. The American Economic Review, 104:2421–2455.

Milgrom, P. and Roberts, J. (1986). Prices and Advertising Signals of Product Quality. Journal of Political Economy, 94:297–310.

Nelson, P. (1970). Information and consumer behavior. Journal of political economy, 78(2):311–329.

Proserpio, D. and Zervas, G. (2016). Online Reputation Management: Estimating the Impact of Management Responses on Consumer Reviews. Marketing Science.

Rao, A. (2018). Deceptive claims using fake news marketing: The impact on consumers.

Rao, A. and Wang, E. (2017). Demand for “healthy” products: False claims and ftc regulation. Journal of Marketing Research, 54.

Rhodes, A. and Wilson, C. M. (2018). False advertising. The RAND Journal of Economics, 49(2):348–369.

Tadelis, S. (2016). Reputation and feedback systems in online platform markets. Annual Review of Economics, 8(1):321–340.

Wu, Y. and Geylani, T. (2020). Regulating deceptive advertising: False claims and skeptical consumers. Marketing Science, 39(4):669–848.

Yasui, Y. (2020). Controlling fake reviews.