Stop it or not? Effect of platform’s governance on firms’ online review manipulation

Abstract

E-commerce firms engaged in online review manipulation mislead online consumers in their purchasing decision-making and undermine the credibility of the platform they are using. Although researchers have proposed various measures to combat review manipulation, few studies have considered platforms’ revenues from an economic perspective and explored how platforms affect the review manipulation of two asymmetrical firms. To fill this research gap, this paper develops a three-player game model to systematically explore the impact of review manipulation governance imposed by a platform on itself and on two asymmetrical firms offering substitutable commodities on the same platform. The results reveal that governance helps firms avoid situations in which they should engage in manipulation due to competitive pressures. Furthermore, even in the presence of governance, both firms may become trapped in a prisoner’s dilemma. Even if the platform imposes review manipulation governance, both firms and the platform can benefit from manipulation. We also consider the temporal effects of governance on the platform’s revenue and validate whether it is beneficial for the platform to impose review manipulation governance in the long run. Quantitative analysis is conducted to elucidate the benefits that can be attained by the three parties under different circumstances. This analysis holds practical significance for e-commerce platforms and firms seeking to impose appropriate measures pertaining to review manipulation.