Do firms prefer likers or doubters?

Zhenhua Wu, Xueyan Yin, Fan Zhang, Pei Yu Chen

Research output: Contribution to conferencePaper

Abstract

The social media has emerged as an appealing new channel for firms to promote products/services. A fundamental but largely unanswered question is how would the firm use social media to promote products. We address the question by focusing on the movie industry and developing a dynamic game-theoretic model. We assume that: 1) firm intends to build its market reputation; 2) consumers always prefer to watch a high-quality movie. Our model suggests that, it can be optimal for a rational firm to underrate the movie. More specifically, we find that the movie distribution firm would have incentives to overrate the movie even if they observe that the movie quality is low. Furthermore, we show that as long as there is a properly designed uncertainty resolution mechanism, the adoption of social media could alleviate the “Lemon” problem in the movie market, which in turn, improves market efficiency.

Original languageEnglish (US)
StatePublished - 2019
Event23rd Pacific Asia Conference on Information Systems: Secure ICT Platform for the 4th Industrial Revolution, PACIS 2019 - Xi'an, China
Duration: Jul 8 2019Jul 12 2019

Conference

Conference23rd Pacific Asia Conference on Information Systems: Secure ICT Platform for the 4th Industrial Revolution, PACIS 2019
CountryChina
CityXi'an
Period7/8/197/12/19

Keywords

  • Information Asymmetry
  • Movie Quality
  • Reputation
  • Social Media

ASJC Scopus subject areas

  • Information Systems

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  • Cite this

    Wu, Z., Yin, X., Zhang, F., & Chen, P. Y. (2019). Do firms prefer likers or doubters?. Paper presented at 23rd Pacific Asia Conference on Information Systems: Secure ICT Platform for the 4th Industrial Revolution, PACIS 2019, Xi'an, China.