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An Economic Approach to Consumer Product Ratings


Beckett, Dustin Hughes (2013) An Economic Approach to Consumer Product Ratings. Dissertation (Ph.D.), California Institute of Technology. doi:10.7907/00EE-KP91.


In three essays we examine user-generated product ratings with aggregation. While recommendation systems have been studied extensively, this simple type of recommendation system has been neglected, despite its prevalence in the field. We develop a novel theoretical model of user-generated ratings. This model improves upon previous work in three ways: it considers rational agents and allows them to abstain from rating when rating is costly; it incorporates rating aggregation (such as averaging ratings); and it considers the effect on rating strategies of multiple simultaneous raters. In the first essay we provide a partial characterization of equilibrium behavior. In the second essay we test this theoretical model in laboratory, and in the third we apply established behavioral models to the data generated in the lab. This study provides clues to the prevalence of extreme-valued ratings in field implementations. We show theoretically that in equilibrium, ratings distributions do not represent the value distributions of sincere ratings. Indeed, we show that if rating strategies follow a set of regularity conditions, then in equilibrium the rate at which players participate is increasing in the extremity of agents' valuations of the product. This theoretical prediction is realized in the lab. We also find that human subjects show a disproportionate predilection for sincere rating, and that when they do send insincere ratings, they are almost always in the direction of exaggeration. Both sincere and exaggerated ratings occur with great frequency despite the fact that such rating strategies are not in subjects' best interest. We therefore apply the behavioral concepts of quantal response equilibrium (QRE) and cursed equilibrium (CE) to the experimental data. Together, these theories explain the data significantly better than does a theory of rational, Bayesian behavior -- accurately predicting key comparative statics. However, the theories fail to predict the high rates of sincerity, and it is clear that a better theory is needed.

Item Type:Thesis (Dissertation (Ph.D.))
Subject Keywords:Recommendation Systems, Product Ratings, Laboratory Experiments, Microeconomics, Experimental Economics, Behavioral Economics
Degree Grantor:California Institute of Technology
Division:Humanities and Social Sciences
Major Option:Social Science
Thesis Availability:Public (worldwide access)
Research Advisor(s):
  • Palfrey, Thomas R.
Thesis Committee:
  • Palfrey, Thomas R. (chair)
  • Ledyard, John O.
  • Border, Kim C.
  • Iaryczower, Matias
Defense Date:5 September 2012
Record Number:CaltechTHESIS:05242013-104712359
Persistent URL:
Default Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:7750
Deposited By: Dustin Beckett
Deposited On:30 May 2013 23:32
Last Modified:04 Oct 2019 00:01

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