UCL School of Management is delighted to welcome Tommaso Bondi, NYU,to host a research seminar discussing ‘Alone, Together: Product Discovery Through Consumer Ratings’

Abstract

Consumer ratings have become a prevalent driver of choice. I develop a model of
social learning in which ratings can inform consumers about both product quality and
their idiosyncratic taste for them. Depending on consumers’ prior knowledge, I show
that ratings relatively advantage lower quality and more polarizing products. The reason
lies in the stronger positive consumer self-selection these products generate: to
buy them despite their de ciencies, their buyers must have a strong taste for them.
Relatedly, consumer ratings should not be used to infer which products are polarizing:
what is polarizing ex-ante needs not be so among its buyers. I test these predictions
using Goodreads book ratings data, and nd strong evidence for them. Goodreads
appears to serve mostly a matching purpose: tracking the behavior of its users over
time reveals an increasing degree of specialization as they gather experience on the
platform: they rate books with a lower average and number of ratings, while focusing
on fewer genres. Thus, they become less similar to their average peer. Taken together,
the ndings suggest that consumer ratings contribute to both the long tail and, relatedly,
consumption segregation. For managers, this illustrates, counterintuitively, the
reputational bene ts of polarizing products, particularly early in a rm’s lifecycle, but
only when paired with the ability to match with the right consumers.