Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282305 
Year of Publication: 
2023
Series/Report no.: 
Quaderni - Working Paper DSE No. 1183
Publisher: 
Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE), Bologna
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.
Subjects: 
online reviews
ratings' variance
length of stay
quality uncertainty
heteroskedasticity
Booking.com
JEL: 
D12
D83
Z30
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Working Paper

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