Presentation at the EU Digital Platform Research Network (EU-DPRN) Summit on 9 June 2023 in Milan, Italy. I talk about how competition between platforms can drive ratings inflation under certain conditions. The presentation is based on a paper coauthored with Yulia Vorotyntseva, Subodha Kumar and Paul Pavlou.

1. What Happens to Ratings When
Both Sides Multihome?
The Impact of Vertical Spillover Effect on Platform Competition
and Ratings Inflation
Yulia Vorotyntseva, Saint Louis University, Chaifetz School of Business
Aleksi Aaltonen, Temple University, The Fox School of Business
Subodha Kumar, Temple University, The Fox School of Business
Paul Pavlou, The University of Houston, Bauer College of Business
EU-DPRN Summit 2023, Milan, Italy
June 9, 2023

2. Online ratings are one of the most important means
by which consumers decide where to eat, what
products to buy, or which doctor to visit.
There is a push toward higher ratings by vendors,
which can result in ratings inflation that decreases
the informativeness of ratings.
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The Problem of Ratings Inflation

3. Why would a platform owner let the ratings
become inflated?
Under what conditions would such a pull
toward upward biased ratings happen?
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4. Average Ratings and Platform Competition
In many markets, both consumers and vendors
multihome on competing platforms.
The adoption of the common five-star ratings system
allows consumers to ‘shop around’ and use average
ratings across platforms to inform their purchases.
à Yet, average ratings for the same items or vendors
often differ between platforms.
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5. Research Questions
1.Do diverging ratings for the same vendor
across platforms affect platform choice?
2.Could this feed back on the ratings?
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6. VERTICAL SPILLOVER HYPOTHESIS
The consumer is more likely to buy from a platform where a restaurant
is rated higher despite the same underlying quality.
Yelp (4.5 stars) Grubhub (3 stars)
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The average
rating concerns
the vendor NOT
the platform!

7. Experiment(s)
Series of incentive aligned and stated preferences experiments before and after the
pandemic using different subject pools
Subjects choose from two restaurants: one restaurant has an equal average rating
on both platforms, whereas for the other restaurant the average rating differs
between the platforms (allows for ceteris paribus reasoning).
For the same restaurant, the quality of the food and delivery will be the same
regardless of platform choice.
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8. Authors’ names blinded for peer review
20 Article submitted to Information Systems Research; manuscript no. (Please, provide the manuscript number!)
platform choice is dependent on the restaurant choice, which is consistent with the presence of a
vertical spillover e↵ect.
Table 2 Subject choices in incentive aligned studies 2 and 4
Y elpHigh
Yelp GrubHub
ME 5 (? 4.5) 2 (? 3.5)
SW 0 (? 4.0) 6 (? 4.0)
GrubHubHigh
Yelp GrubHub
P&G 1 (?3.5) 10 (?4.5)
C&P 1 (?4.0) 4 (?4.0)
Y elpHigh2
Yelp GrubHub
RL 5 (? 5) 6 (? 4)
CS 1 (? 4.5) 14 (? 4.5)
To test the independence of the platform choice from the restaurant choice statistically, we use
Pearson’s Chi-squared test with p-values obtained by Monte Carlo simulation with 106
replicates
Incentive-aligned Experiments:
(Subjects get what they choose)
p=0.021 n.s. p=0.0545

9. Participants who choose the restaurant with
divergent ratings are more likely to choose the
platform where it is rated higher than the subjects
who choose the restaurant with consistent ratings.
There is a vertical spillover effect from
vendor ratings to platform choice.
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10. RQ1: Do diverging ratings for the same vendor across
platforms affect platform choice?
Yes
Consumers are, all other things being equal, more likely to buy from a
platform where a vendor has a higher average rating.
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11. RQ2: Could this feed back on the ratings?
Under the vertical spillover effect, a platform that
offers more accurate but lower ratings could end up
as a virtual showroom for its competitors.
Therefore, the vertical spillover effect incentivizes
platform owners to let the ratings become inflated.
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12. Contributions to Literature
1. We identify a vertical spillover effect that can affect platform competition and
feed back to average ratings.
2. Competition should, in principle, benefit consumers yet we show that providing
more accurate but lower ratings can be strategically disadvantageous to a retail
platform when both vendors and consumers multihome.
3. We explain the ‘pull’ for higher average ratings, that is, why platforms owners
may be willing to let ratings inflation happen.
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13. Managerial and Regulatory Implications
1. If both vendors and consumers can easily multihome, platform owners need to
manage their rating strategically to avoid providing a virtual showroom to
competitors.
2. Adopting an alternative to the standard 5-star system may be a feasible option
especially to new entrants whose vendors do not yet have established their
ratings on the platform.
3. Regulators could consider separating the provision of ratings and reviews from
retail platform business.
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14. Thank you!
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15. Key Assumption
We do NOT assume that the quality of overall consumption experience would be
the same on competing platforms, i.e. there may be (rationally) valid reasons why
the ratings for the same vendor differ between platforms. We only assume that:
1. Ceteris paribus. Consumers are more likely to order from a platform where the
vendor is rated higher all other things being equal. Our experimental design
allows this.
2. Ratings inflation is a real problem. There is empirical evidence for this.
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16. Experiments
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Method Subject pool (n) Reward Lab setting Time period
1 Stated preferences Business majors (301) Course credit Online survey Fall 2019
2 Incentive aligned Staff & students (29) Meal In-person Fall 2019-Spring 2020
3 Stated preferences mTurk workers (608) $2 Online survey June 2020
4 Incentive aligned Staff & students (26) Meal Zoom meeting Fall 2021

17. Subjects’ Choice Screen
Category: Dinner, Lunch, Middle
Eastern, Pitas, Smoothies and Juices
Average rating: 3.5 stars
Delivery hours: 10:00am-12:00am
Category: Dinner, Hot Dogs, Lunch
Specials, Sandwiches, Subs
Average rating: 4 stars
Delivery hours: 11:00am-10:30pm
Restaurant 1
Category: Middle Eastern, Falafel,
Juice Bars & Smoothies
Average rating: 4.5 stars
Delivery hours: 10:00am-11:45pm
Delivery is fulfilled by GrubHub
Category: Sandwiches, Cheesesteaks
Average rating: 4 stars
Delivery hours: 11:00 am-10:15pm
Delivery is fulfilled by GrubHub
Restaurant 2
Grubhub
Yelp
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