Chasing Diamonds and Crowns: Consumer Limited Attention and Seller Response

• 成果类型: Article
• 署名作者: Zhong, Zemin (Zachary)
• 署名单位: University of Toronto
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4060
• 发表日期: 2022
• 页码: 4380-4397
• 关键词: limited attention; Behavioral IO; online reputation; regression discontinuity

摘要

Online platforms often assign sellers summary symbols based on whether their ratings pass certain thresholds. Consumers may focus on the symbols and pay limited attention to the ratings. This bias leads to discontinuously increased demand at the thresholds. I use a theoretical model to illustrate that sellers will lower the prices before their ratings reach the thresholds and increase their prices afterward due to the positive demand shock. I collect data from Taobao to test the theoretical predictions. Using regression discontinuity, I find that on the demand side, the hourly sales increase significantly when a seller passes the threshold, even conditional on the same item. On the supply side, the prices indeed exhibit a V-shaped pattern with respect to the ratings. Furthermore, sellers pre-emptively increase prices shortly before reaching thresholds, supporting the theoretical predictions.