Prof. Hsing Kenneth Cheng
MM will hold a Public Webinar on the topic “Manipulation for Competition: Agency Pricing in the Presence of Quality Misrepresentation” on 8 July 2021.
Abstract:
On e-commerce platforms, consumers rely heavily on online product reviews, sales volume, number of product page visits, and social media discussions to infer product quality. As a result, the past decade has witnessed an explosive growth of seller-initiated misrepresentation of quality through fake reviews, fake sales volume, and fake clicks, all used to manipulate consumers’ quality perception of products. In this study, we develop an analytical model to investigate sellers’ quality misrepresentation decisions under the agency pricing regime. The platform can use two strategies to discourage sellers’ quality misrepresentations: increasing the cost of misrepresentation and implementing a more lenient product return policy. We find that while a stricter anti-misrepresentation strategy can deter the misrepresentation level of the high-quality seller, such strategy may unintendedly incentivize the low-quality seller to conduct more quality misrepresentation. Further, increasing return leniency can deter low-quality seller’s quality misrepresentation level in a wider range of market conditions than increasing the misrepresentation cost. Finally, the platform can decide the anti-misrepresentation strategies and the strength of these strategies based on its specific objective. The findings demonstrate the necessity of evaluating anti-misrepresentation strategies in a competitive setting.
