Why Reviews Matter Economically

Online reviews and ratings help buyers judge quality before they buy, reducing the information gap between sellers and customers.

Before the internet, you relied on brand names, shopkeepers and friends. Now, online reviews let strangers tell you what a product is really like.

Solving a problem

Buyers can’t inspect quality in advance; reviews reveal what the seller might hide.

Influence

Higher ratings lead to more sales and let sellers charge higher prices.

Everywhere

Restaurants, hotels, apps, doctors, sellers and delivery riders are rated.

A restaurant choice

A traveller picks a place with 4.5 stars over one with 3.5.

Assuming ratings are objective

They reflect who chooses to review.

Key takeaways

Reviews reduce information gaps.
Ratings drive sales.
Prices can rise with reputation.
Reviews cover many services.