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Ben Greiner

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Ben Greiner

Researcher of the Month

On­line feed­back: How the wrong sys­tem can dis­tort the pic­ture

Espe­cially on­line shop­pers often base their pur­chas­ing de­cisions on cus­tomer re­views. Hardly anyone books a hotel without first scrolling through all the feed­back pos­ted by pre­vi­ous guests. In his re­search, WU Pro­fessor Ben Greiner, head of the In­sti­tute for Mar­kets and Strategy and the Com­pet­ence Center for Ex­per­i­mental Re­search at WU, in­vestig­ates the factors that cause dis­tor­tions in on­line feed­back sys­tems. Such dis­tor­tions are det­ri­mental not only to cus­tomers, who are provided with less re­li­able in­form­a­tion, but also to busi­nesses, be­cause their cus­tomers are less likely to trust them due to less re­li­able in­form­a­tion.

Whether it’s book­ing a hotel or shop­ping on­line: Many people base their de­cisions on cus­tomer re­views. At the same time, pub­licly pos­ted re­views provide a strong in­cent­ive for com­pan­ies to im­prove products and ser­vices. For this to work, cus­tomer feed­back has to be both hon­est and in­form­at­ive. WU Pro­fessor Ben Greiner uses field data ana­lysis of on­line mar­ket­places like eBay and lab­or­at­ory tests to in­vestig­ate which on­line feed­back sys­tems work best. He ob­served a num­ber of dif­fer­ent pat­terns of so­cial be­ha­vior that were af­fected by the feed­back rules of each sys­tem.

Re­venge feed­back for neg­at­ive re­views

On eBay, one of the mar­ket plat­forms that al­lows buy­ers and seller to provide mu­tual feed­back, Greiner’s study provides evid­ence for strong re­cipro­city in feed­back be­ha­vior. Pos­it­ive re­views from buy­ers were al­most al­ways re­war­ded with pos­it­ive feed­back from vendors, whereas a neg­at­ive re­view al­most al­ways res­ul­ted in neg­at­ive re­venge feed­back from the seller. As a res­ult, many people who had a neg­at­ive ex­per­i­ence with a pur­chase chose not to leave feed­back at all, for fear of get­ting neg­at­ive feed­back in re­turn. This dis­torts the entire feed­back im­age: 98% of the feed­back given on eBay is pos­it­ive. “This means that the col­lect­ive feed­back of­fers only a lim­ited amount of in­form­a­tion,” says Greiner, “Our lab­or­at­ory stud­ies have shown that this is the res­ult of the sys­tem’s open­ness. If you change the rules and don’t pub­lish feed­back until both parties to the trans­ac­tion have sub­mit­ted their re­view, it leads to more neg­at­ive, hon­est feed­back but, un­for­tu­nately, also to a lower rate of par­ti­cip­a­tion in the feed­back sys­tem as a whole. It also works bet­ter if only one-sided feed­back is al­lowed.”

Poor com­prom­ise

Al­low­ing posters the op­tion to re­tract feed­back may also have un­in­ten­ded ef­fects. Ideally, this op­tion al­lows both parties to the trans­ac­tion to find a solu­tion in the event of a con­flict. The stud­ies re­vealed the op­pos­ite be­ha­vior, however: For example, sellers who were ex­pect­ing neg­at­ive re­views pos­ted neg­at­ive feed­back about buy­ers as lever­age to later con­vince the buy­ers to re­tract their own neg­at­ive re­view. “This also res­ults in feed­back dis­tor­tion. The in­form­a­tion value and ef­fect­ive­ness of the feed­back sys­tem are con­sid­er­ably re­duced,” says Greiner. Over­all it was shown that the spe­cific rules of in­di­vidual feed­back sys­tems de­termine the stra­tegic in­cent­ives buy­ers and sellers are ex­posed to when they con­trib­ute their feed­back. An ef­fi­ciently designed and planned feed­back sys­tem takes these factors into ac­count.

The study

For his re­search, Ben Greiner used field data from eBay and other on­line mar­ket plat­forms as well as data from lab­or­at­ory ex­per­i­ments. Greiner ex­plains, “In the field, there are a num­ber of vari­ables we can’t ob­serve. For this reason, we re­cre­ate mar­kets in the com­puter lab­or­at­ory and ask hu­man par­ti­cipants to make de­cisions tak­ing the roles of buy­ers and sellers. The profits that par­ti­cipants made in the lab ex­per­i­ments were paid out to them in cash. This en­sures the au­thenti­city of the de­cisions made. Like in a wind tun­nel, we can then change the design, i.e. the rules of the feed­back sys­tem, and ob­serve the re­ac­tions of the buy­ers and sellers.”