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Bad News Turned Good: Reversal under Censorship†

Bad News Turned Good: Reversal under Censorship† AbstractSellers 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. (JEL D82, D83, L15) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Bad News Turned Good: Reversal under Censorship†

Bad News Turned Good: Reversal under Censorship†

American Economic Journal: Microeconomics , Volume 14 (2) – May 1, 2022

Abstract

AbstractSellers 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. (JEL D82, D83, L15)

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Publisher
American Economic Association
Copyright
Copyright © 2022 © American Economic Association
ISSN
1945-7685
DOI
10.1257/mic.20190379
Publisher site
See Article on Publisher Site

Abstract

AbstractSellers 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. (JEL D82, D83, L15)

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: May 1, 2022

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