Bad News Turned Good: Reversal Under Censorship
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- censor_accepted
Accepted author manuscript, 535 KB, PDF document
Sellers often have the power to censor the reviews of their products. We explore the effect of these censorship policies in markets where some consumers are unaware of possible censorship. We find that if the share of such “naive” consumers is not too large, then rational consumers treat any bad review that is revealed in equilibrium as good news about product quality. This makes bad reviews worth revealing and allows the seller to use them as a costly signal of his product's quality to rational consumers.
Original language | English |
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Journal | American Economic Journal: Microeconomics |
Volume | 14 |
Issue number | 2 |
Pages (from-to) | 506-60 |
ISSN | 1945-7669 |
DOIs | |
Publication status | Published - May 2022 |
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