Online product reviews: Is a finer-grained rating scheme superior to a coarser one?

Murat Tunç, Huseyin Cavusoglu, Srinivasan Raghunathan

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Product review platforms in online marketplaces differ with respect to the granularity of product quality information they provide. While some platforms provide a single overall rating for product quality (also referred to as the single-dimensional rating scheme), others provide a separate rating for each individual quality attribute (also referred to as the multidimensional rating scheme). The multidimensional rating scheme is superior to the single-dimensional rating scheme, ceteris paribus, in reducing consumers' uncertainty about product quality and value. However, we show that, when sellers respond to product ratings by adjusting their prices, compared to the single-dimensional rating scheme, the multidimensional rating scheme does not always benefit consumers, nor does it necessarily benefit sellers or society. The uncertainty associated with quality attribute rating and the extent of differentiation between competing products determines whether a finer-grained multidimensional rating scheme is superior to a coarser grained single-dimensional rating scheme from the consumer, seller, and social planner perspectives. The main driver of the results is that more (less) granular and less (more) uncertain information exposes (hides) underlying differentiation, or a lack thereof, between competing products, which, in turn, alters upstream price competition in the presence of heterogeneous consumer preferences. The results demonstrate that focusing on the information transfer aspect of rating schemes provides only a partial understanding of the true impacts of rating schemes.

Original languageEnglish
Pages (from-to)2193-2234
JournalManagement Information Systems Quarterly
Volume45
Issue number4
DOIs
Publication statusPublished - Dec 2021

Keywords

  • online product reviews
  • competition
  • retail platforms
  • analytical modeling
  • economics of IS

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