Red Flag! The Consequences of Alerting Consumer to Fake Reviews

Given that most consumers consult online reviews, it is important for companies to get high ratings for their products. To boost their ratings relative to those of competitors, some companies have hired workers to post positive reviews for their products or negative reviews for their competitors. Defined as those written with the intent to mislead or deceive, fake reviews are a big problem for platforms such as Amazon, Yelp and Tripadvisor. Yelp has removed roughly 20% of reviews for lacking credibility and helpfulness (Luca and Zervas 2016), while both Tripadvisor and Amazon have taken legal action to try to curb the problem.

In an effort to increase transparency and credibility, some websites (e.g., Yelp and TripAdvisor) inform consumers when they have caught a brand involved in the creation of fake reviews, but it is unclear how consumers respond to this alert. In this paper, we investigate the effects of fake review alerts on consumers’ brand evaluations. Although fake review alerts are meant to signal that the website is competent enough to identify fraudulent reviews, the alerts make consumers aware of the presence of fraud. We suggest that a fake review alert (versus no alert) activates persuasion knowledge (Friestad and Wright 1994), lowering the credibility of the brand’s reviews. To correct for the presence of fake reviews, consumers modify their brand evaluations upwards or downwards. However, the salience of the fake review alert leads to overcorrection, so that fake review alerts may end up creating the very bias in consumer decisions that they are trying to remove. We use multiple methodologies to investigate the effect of a fake review alert on brand ratings and intentions, including analysis of data from the web as well as three experiments.