Noisy signals: do ratings’ volatility depend on the length of the consumption span?

Boto-García, David ; Leoni, Veronica (2023) Noisy signals: do ratings’ volatility depend on the length of the consumption span? Bologna: Dipartimento di Scienze economiche, p. 50. DOI 10.6092/unibo/amsacta/7230. In: Quaderni - Working Paper DSE (1183). ISSN 2282-6483.
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Abstract

This paper investigates the informational content of online reviews. For the case of hotels, we model how the length of the stay shapes the variance of review scores. Grounded on violations of temporal monotonicity, errors in recall and hedonic adaptation theories, we first present a characterization of how the consumption span affects the non-deterministic component of consumer satisfaction. Next, we conduct an empirical analysis using more than 525,000 individual reviews from Booking.com in 5 major European cities. Under a heteroskedastic framework, we document that individual ratings’ volatility decreases with the length of the stay. This implies that online ratings from short stayers (short consumption episodes) are noisy signals of the underlying hotel quality. Furthermore, we show that greater volatility in hotel ratings translates into a lower share of useful reviews for subsequent consumers. Our findings offer relevant insights for platform design operators about the sources of ratings’ volatility and how this affects social learning.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Boto-García, DavidDepartment of Economics, University of Oviedo (Spain)0000-0001-8065-0983
Leoni, VeronicaCenter for Advanced Studies in Tourism, University of Bologna0000-0001-8419-4241
Keywords
online reviews, ratings’ variance, length of stay, quality uncertainty, heteroskedasticity, Booking.com.
Subjects
ISSN
2282-6483
DOI
Deposit date
30 Mar 2023 07:57
Last modified
30 Mar 2023 07:57
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