Is More Better? Divide between Retailer's and Manufacturers' Preferences for Reviews and Review Monetization

Research on online product reviews has examined a variety of issues ranging from reviewers' motivation to write reviews to impact of reviews on product sales. Implicit in a large number of studies in this research stream is the notion that more reviews is better for sellers and consumers. However, it is unclear whether a retailer, who often controls the review platform, and manufacturers, whose products are being reviewed, prefer more reviews to less. Using a game theoretical model of a context in which a retailer sells competing products from two manufacturers and consumers are uncertain about product qualities, we show that the retailer's and the manufacturers' preferences regarding the number of reviews are not always aligned. If the reviews are costless, then additional reviews benefit the retailer, but manufacturers are hurt by additional reviews when the number of reviews exceeds a threshold. Moreover, if the consumers' own uncertainty about product qualities is not too high, then the manufacturers do not prefer to have reviews at all. On the other hand, if the retailer incurs a sufficiently high cost to generate reviews, he may prefer to have fewer reviews than manufacturers. We show that the divide between the retailer's and the manufacturers' preferences can induce the retailer to monetize reviews by charging a fee to manufacturers in return for a guarantee on the number of reviews that would be made available in the review platform. The retailer's revenue from such monetization follows a U-shape with respect to the cost of generating reviews as well as the extent to which reviews can reveal true product quality, suggesting that the product type and review platform design play a significant role in the attractiveness of review monetization for the retailer. The revenue from "selling" reviews to manufacturers does not exceed the cost of generating reviews, implying the retailer's benefit from reviews, even when they can be monetized, is driven by reviews' positive impacts on the retailer's core business of selling products to consumers. The findings provide economic insights into the nascent efforts of Amazon to monetize reviews through programs such as Amazon Vine.