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Abstract
Online word of mouth (WOM) helps consumers learn about sellers’ products/services quality and influences market competition. Some sellers, taking advantage of the anonymity of contributing consumers, fake consumer WOM to boost their products/services ratings. This research uses a game-theoretical model to examine sellers’ dynamic pricing and their review manipulation decisions in an online marketplace. We explore the critical drivers of review manipulation and how fake reviews shape the market outcome. Specifically, the model shows a self-inhibition mechanism of review manipulation, which prevents high-quality sellers and softly discourages low-quality sellers from faking reviews. Fake WOM reduces vertical seller differentiation and intensifies price competition. Moreover, negativity bias in genuine customer reviews enhances self-inhibition, especially for low-quality sellers. Consequently, sellers with extreme (very high or very low) quality do not fake reviews when consumers are more likely to write reviews for unsatisfying products/services.
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