Effects of Incentivized Fake Reviews on E-commerce Markets

Abstract

This study analyzes difficulties posed by dealers operating in e-commerce who intervene in reviews and undermine credibility by offering money to purchasers who post highly positive reviews of their products: the incentivized fake review problem. Moreover, we study its effects on e-commerce markets. Offering biased incentives to receive more favorable reviews undermines the review mechanism validity. In e-commerce market transactions, reviews by buyers more strongly affect sales of products than in other markets. Because a loss of trust in reviews reduces the transaction volume, this incentivized fake review problem might reduce the profits of e-commerce operators and of dealers. No report of the relevant literature has described a theoretical test of these problem-related hypotheses, this study explores the subject. First, we developed a model in which buyers obtain information about sellers' products through user-generated reviews. Sellers can distort the reviews indirectly by providing incentives for highly rated reviews. Next, based on this model, we derived a Nash equilibrium incentive amount by taking a game theoretical approach to the situation of reading about incentive amounts offered by the seller. Finally, we analyzed transaction situations and the seller's gain in the equilibrium. The results revealed many points to be consistent with findings from earlier studies and with actual conditions prevailing in e-commerce markets. However, this research is limited to the proposal and analysis of a theoretical model. Therefore, future studies must be undertaken using economic experiments to verify the consistency of a model using actual transaction data and to verify the attitudes of buyers when purchasing.

Keywords: game theory, service engineering and customer review

DOI: 10.54941/ahfe1002534