The Good, the Bad and the Picky: Consumer Heterogeneity and the Reversal of Product Ratings

We study the impact of consumer heterogeneity on online ratings. Consumers differ in their experience, which can affect both their choices and ratings. Thus, biases in average ratings can arise when the opinions of experienced and novice users are aggregated. We first build a two-period model to characterize the biases’ drivers and consequences. We test our theory combining data from IMDb and MovieLens, two well-known movie ratings platforms. We proxy users’ experience with the total number of ratings posted on the platforms. First, using external measures of quality, such as the Academy awards and nominations, we show that, on both platforms, experienced users, on average, rate movies of higher quality compared with novices. Moreover, they post more stringent ratings than novices for more than 98% of movies. Combined, these imply a compression in aggregate ratings, and thus a bias against high quality movies. We then propose a simple, fixed-point algorithm to debias ratings. Our debiased ratings demonstrate the presence of ranking reversals for more than 8% of comparisons in our sample. As a result, our debiased ratings better correlate with external measures of quality.