Economic role of online review filtering systems in the electronic marketplaces

Abstract

The monetary effects of online reviews motivate firms to manipulate such reviews, and electronic marketplaces then adopt online review filtering systems to combat manipulation. We develop an analytical model to explore the role of a filtering system for a monopoly firm, electronic marketplaces and consumer surplus in the monopoly context and then extend it to the symmetrical competition context to explore whether competition changes the role of the filtering system. The results show that the existence of such a filtering system strengthens the possibility of manipulation by the monopoly firm when the intelligence of the filtering system is relatively low. However, in the competitive context, whether the existence of such a filtering system strengthens the possibility of manipulation by both firms relates to the difference between the total consumer base with manipulation under no filtering system and that under the filtering system. We also find that in the monopoly context, the electronic marketplace will adopt the filtering system only when the intelligence of the filtering system is relatively low and the unit misfit cost is moderate. However, in the competitive context, the intelligence of the filtering system is irrelevant to whether the electronic marketplace adopts the filtering system. Finally, the adoption of the filtering system always benefits consumers in both the monopoly and competing contexts.