Underpromise and overdeliver? Online product reviews and firm pricing

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• dc.contributor.author Martin, Simon
• dc.contributor.author Shelegia, Sandro
• dc.date.accessioned 2025-05-21T12:47:42Z
• dc.date.available 2025-05-21T12:47:42Z
• dc.date.issued 2021
• dc.date.updated 2025-05-21T12:47:42Z
• dc.description.abstract We consider a signaling model capturing the introductory and the mature phase of a product. Information concerning product quality is transmitted between consumers through reviews, which partially depend on the expectations consumers had prior to their purchase. When future sales are sufficiently important, a novel tension arises: High-quality types may want to underpromise and overdeliver by imitating low types in order to get a better review. We show the existence of a Pareto-improving separating equilibrium. Both more informative reviews and price transparency can lead to higher prices. Our analysis reveals a new rationale for loss-leadership.
• dc.description.sponsorship Martin thankfully acknowledges financial support from the Vienna Graduate School of Economics. Shelegia acknowledges financial support from the Spanish Agencia Estatal de Investigación (AEI), through the Severo Ochoa Programme for Centres of Excellence in R&D (Barcelona School of Economics CEX2019-000915-S), and from the Spanish Ministry of Economy and Competitiveness through grants ECO2017-89240-P and ECO2014-59225-P.
• dc.format.mimetype application/pdf
• dc.identifier.citation Martin S, Shelegia S. Underpromise and overdeliver? Online product reviews and firm pricing. Int J Ind Organ. 2021;79:102775. DOI: 10.1016/j.ijindorg.2021.102775
• dc.identifier.doi http://dx.doi.org/10.1016/j.ijindorg.2021.102775
• dc.identifier.issn 0167-7187
• dc.identifier.uri http://hdl.handle.net/10230/70446
• dc.language.iso eng
• dc.publisher Elsevier
• dc.relation.ispartof International Journal of Industrial Organization. 2021;79:102775
• dc.relation.projectID info:eu-repo/grantAgreement/ES/2PE/ECO2017-89240-P
• dc.relation.projectID info:eu-repo/grantAgreement/ES/1PE/ECO2014-59225-P
• dc.rights © Elsevier http://dx.doi.org/10.1016/j.ijindorg.2021.102775
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.subject.keyword Quality signaling
• dc.subject.keyword Consumer reviews
• dc.subject.keyword Reputation
• dc.subject.keyword Loss leadership
• dc.title Underpromise and overdeliver? Online product reviews and firm pricing
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/acceptedVersion