Rating Anticipation and Strategic Downward Selection in Consumer-Generated Rating Systems: Evidence from a Peer-to-Peer Platform Market

Abstract

This paper examines how sellers use strategic downward selection to game consumer-generated rating systems. I highlight the role of rating anticipation in sellers' selection of buyers – concerns regarding buyers' post-hoc evaluations of a seller influence whom she chooses to transact with at the outset. To reduce evaluation anxiety, sellers strategically avoid buyers with superior market standings, preferring those with an inferior standing, who are perceived as more likely to be satisfied and provide positive evaluations. Analysing nearly half a million transactions on a major peer-to-peer lodging platform in which all participants list their homes, I find that hosts are more inclined to approve requests from guests with inferior homes. This tendency is stronger when hosts experience rating declines, heightening their evaluation anxiety. It is also more pronounced among experienced hosts who better understand consumer-generated rating systems, and when hosts and guests are in the same country, facilitating social comparisons.