Fake Reviews with “Verified-Purchase” and Commission Fee: Embellishment vs. Sniping

Abstract

There is growing evidence showing that sellers manipulate product reviews either by embellishing themselves or by snipping at their competitors. We develop an analytical model to examine the effect of product prices and platforms’ commission on sellers’ review-manipulating strategies and profits under the “Verified Purchase” policy (e.g., Amazon.com). We find that under this policy, a higher platform’s commission rate may discourage both two types of review manipulation. As for the price effect, sellers’ snipping increases with their prices but decreases with competitors’ prices while their embellishment mainly depends on the commission rate. For the platform, we identify a non-monotone relationship between profit and the commission rate, which is driven by sellers’ review manipulation. Our results suggest that platforms should carefully set their commission rate to discourage sellers from manipulating reviews and meanwhile maintain a certain level of profit under the “Verified Purchase” policy