Ratings meet prices: The dynamic relationship of quality signals

Abstract

The impact of product ratings is significant in the experience goods market, whose intangible products are difficult to evaluate before consumption. Product ratings can reduce information asymmetries because they represent a credible signal of quality and thus positively affect product sales. In this study, we shed light on how professional critics behave by focusing on the influence of product characteristics and former reviews on rating behavior and market prices as additional quality signals in wine markets. Using 13,911 observations from professional wine tastings, we analyze 8,444 worldwide-produced wines and their ratings over 20 years. We find clear evidence to suggest that prices and product ratings are significantly related. Finally, the results suggest that review consistency evolves and determines current ratings.

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“…According to Friberg and Gr ö nqvist (2012), a favorable review can result in a 6% rise in demand the week after publication. Kaimann et al (2023) find that prices and product ratings are significantly related and that review consistency evolves and even determines current evaluations. Combris et al (1997) state that objective cues (such as vintage and expert rating scores) significantly impact wine prices.…”

“…Kaimann et al. (2023) find that prices and product ratings are significantly related and that review consistency evolves and even determines current evaluations. Combris et al.…”