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To Brush or Not to Brush: Product Rankings, Consumer Search and Fake Orders

Office of Alumni and External Relations    2020-06-01

To Brush or Not to Brush: Product Rankings, Consumer Search and Fake Orders


Guest:Zhan Shi, Assistant Professor, PBC School of Finance, Tsinghua University

Host:Li Chengzhang, Assistant Professor

Time:Thursday, Jun 4th, 2020, 09:00-11:00

Venue:ZOOM

 

Abstract:

Brushing” — the practice of online merchants placing fake orders of their own products on e-commerce platforms — has recently received widespread public attention. On the one hand, brushing enables merchants to boost their rankings in search results, because products with higher sales volume are often ranked higher. On the other hand, rankings matter because search frictions faced by consumers narrow their attention to only the few products that show up at the top. Thus, fake orders from brushing can affect real consumer choice. We build a stylized model to understand merchants’ strategic brushing behavior and its welfare implications. We consider two competing merchants selling substitutable products (one of high quality, the other of low quality) in an evolutionary sales-based ranking system that assigns a higher ranking to a product with higher sales. In principle, such an adaptive system improves consumer welfare relative to a case in which products are randomly ranked, but it also triggers brushing as an unintended consequence. We find that the presence of brushing can reverse this welfare advantage, and cause consumer welfare in the sales-based ranking system to be even lower than what it would be in a random-ranking system. If brushing gets more costly for merchants (e.g., due to tougher regulations), it may surprisingly harm consumers as it blunts brushing by the high-quality merchant but induces the low-quality one to brush more aggressively. If search is less costly for consumers (e.g., due to improved search technologies), it can actually hurt them as it may disproportionately discourage the high-quality merchant from brushing even though both merchants brush less.

Bio

Luyi Yang is an assistant professor of operations management and business analytics at Johns Hopkins University, Carey Business School. He conducts research in service operations, business model innovation, digital marketplace, sharing economy, sustainable operations and operations-marketing interface. He has a keen interest in understanding emerging business phenomena and policy issues which, often driven by new technologies, involve both strategic (social) interactions and novel system dynamics. His work has been published in leading academic journals such as Management Science and Manufacturing & Service Operations Management, covered by major media outlets such as Forbes, and recognized by various research awards. Prior to joining Carey, Yang received his Ph.D. and M.B.A. from the University of Chicago, Booth School of Business, and his B.S. in Industrial Engineering and B.A. in English, both from Tsinghua University. He will be joining the faculty of the University of California, Berkeley, Haas School of Business this summer.


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