Platform Manipulation in Online Retail Marketplace with Sponsored Advertising

Fei Long, Yunchuan Liu

Research output: Contribution to journalArticlepeer-review

Abstract

In this paper, we study an online retail marketplace’s incentive to manipulate sellers’ product attractiveness to consumers (e.g., through fake sales, fake reviews, or dishon-est endorsement), as well as sellers’ placement ranking. We design a model of an online retail marketplace with a platform that manipulates sellers’ product attractiveness and sellers’ organic ranking order, and the sellers decide product prices and bid for sponsored advertising space on the platform. We find that the platform may manipulate an inferior seller’s product to appear more attractive to intensify sellers’ competition to bid for advertising and also manipulate a superior seller’s organic placement to either compensate or penalize the superior seller. We show that public policies, such as banning fake sales and fake reviews only by third-party sellers, may not necessarily eradicate manipulation on the platform if they ignore the platform’s incentive for manipulation in the first place.

Original languageEnglish (US)
Pages (from-to)317-345
Number of pages29
JournalMarketing Science
Volume43
Issue number2
DOIs
StatePublished - Mar 1 2024

Keywords

  • auction
  • endorsement
  • fake reviews
  • fake sales
  • game theory
  • platform manipulation
  • sponsored advertising

ASJC Scopus subject areas

  • Business and International Management
  • Marketing

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