“The Determinants of Online Review Informativeness: Evidence from Field Experiments on Airbnb” by Dr. Andrey Fradkin
STRATEGY SEMINAR
Speaker:
Dr. Andrey Fradkin
Postdoctoral Associate
Initiative on the Digital Economy
MIT Sloan School of Management
Abstract:
Reputation systems are used by virtually all digital marketplaces but their design varies greatly across websites, even within the same industry. Furthermore, because reviews are a public good, reputation systems are imperfectly informative and this can lead to worse matches and moral hazard in equilibrium. We use the setting of Airbnb to study how design choices affect the ability of ratings and reviews to aggregate information. We first show that online reviews are highly correlated with anonymous and private ratings as well as other signals of transaction quality. We then study two experimental changes to the reputation system of Airbnb. The first change offered guests a $25 coupon to submit a review. The second change implemented a simultaneous-review system, which eliminated strategic reciprocity from reviews. We show that both experiments made the reputation system more informative and use our findings to quantify the importance of mechanisms that cause information loss in the control group.
