Extrinsic Versus Intrinsic Rewards for Contributing Reviews in an Online Platform

Firms have considered various forms of incentives for writing reviews, including the use of extrinsic rewards to attract reviewers. Relatedly, this paper studies the implications of monetary incentives for writing online reviews. We encountered a natural experiment design where one review platform suddenly started offering monetary incentives for writing reviews. We refer to it as the treated platform. Along with data from Amazon.com and using the difference-in-differences approach, we compare the quantity and quality of reviews before and after rewards were introduced in the treated platform. We find that reviews are significantly more positive but the quality decreases. Taking advantage of the panel data, we also evaluate the effect of rewards on existing reviewers. We find that their level of participation after monetary incentives decreases but not their quality of participation. Lastly, even though the platform enjoys an increase in the number of new reviewers, disproportionately more reviews appear to be written for highly rated products