The Market for Evaluations

Abstract

Recent developments in computer networks have driven the cost of distributing information virtually to zero, creating extraordinary opportunities for sharing product evaluations. We present pricing and subsidy mechanisms that operate through a computerized market and induce the efficient provision of evaluations. The mechanisms overcome three major challenges: first, evaluations, which are public goods, are likely to be underprovided; second, an inefficient ordering of evaluators may arise; third, the optimal quantity of evaluations depends on what is learned from the initial evaluations. (JEL D70, D83, H41, L15)