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Faculty of Economics

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Charlson, G.

Rating the Competition: Seller Ratings and Intra-Platform Competition

CWPE2106

Abstract: Product ratings are commonplace on large online platforms, like Airbnb and Amazon Marketplace. One use for these ratings is to order search results. Platform owners are able to choose the extent to which ratings can be used to determine the probability a given seller is observed by a sets of buyers. Since demand is higher for high quality products, there is an incentive to increase the probability that highly-rated sellers are observed by biasing search results towards them. However, biasing search results in this way results in competition being more concentrated, reducing prices. The extent to which it is profitable to use ratings as a means of ordering search results depends on the properties of the market(s) the platform operates in.

Keywords: Networks, strategic interaction, network games, interventions, industrial organisation, platforms

JEL Codes: D40 L10 L40

Author links: George Charlson  

PDF: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2106.pdf

Open Access Link: https://doi.org/10.17863/CAM.65425