Strategic behavior by market intermediaries

• Author: David M. Waguespack,Daniel M. Olson
• Published date: 01 December 2020
• Date: 01 December 2020
• DOI: http://doi.org/10.1002/smj.3220

RESEARCH ARTICLE

Strategic behavior by market intermediaries

Daniel M. Olson

1

| David M. Waguespack

2

1

Foster School of Business, University of Washington, Seattle, Washington, DC

2

Robert H. Smith School of Business, University of Maryland, College Park, Maryland

Correspondence

Daniel M. Olson, Foster School of

Business, University of Washington,

Seattle, Washington, DC.

Email: dmolson@uw.edu

Abstract

Research summary: We explore how information

intermediaries preserve relationships with firms they

cover and differentiate from competitors while also

maintaining legitimacy with their audiences. We find

that intermediaries evaluating movies and video games

delay disclosing more negative reviews of heavily

marketed products so that they do not coincide with

the major product marketing push. We also find that

media organizations artificially differentiate themselves

from their competitors. We demonstrate that critics are

more deviant when they can observe another's opinion

and that differentiation increases when they tend to

evaluate the same types of products. Our interpretation

is that information intermediaries do not simply pro-

vide objective reviews, but instead appear strategic in

balancing pressures from product “suppliers”and com-

petitors as they compete for the attention of their

audiences.

Managerial summary: We argue that film and video

game reviews by professional media outlets reflect two

types of strategic behavior. First, intermediaries evalu-

ating movies and video games delay disclosing more

negative reviews of heavily marketed products. Second,

critics artificially deviate their review scores from those

of close competitors. We conclude that information

intermediaries do not simply provide objective reviews,

but instead appear strategic in balancing pressures from

Received: 14 September 2015 Revised: 27 April 2020 Accepted: 28 April 2020 Published on: 11 August 2020

DOI: 10.1002/smj.3220

2474 © 2020 John Wiley & Sons LLC. Strat Mgmt J. 2020;41:2474–2492.wileyonlinelibrary.com/journal/smj

product “suppliers”and competitors as they compete

for the attention of their audiences.

KEYWORDS

critics, evaluation, intermediaries, movies, video games

1|INTRODUCTION

Do market intermediaries strategically modify their reporting? Utilizing datasets of

30.2 thousand film reviews and 32.8 thousand video game reviews published by professional

media outlets from 2011 to 2014, in this note, we examine how information intermediaries are

strategic in the timing and substance of reviews. We report two main findings. First, intermedi-

aries delay publishing more negative reviews for more commercially important products. These

delayed reviews, even though the negative information is ultimately revealed, are less likely to

coincide with the initial product release marketing push than more positive reviews from the

same outlet. Second, in cases where a pair of media outlets reviews the same product and the

focal media outlet can observe the other's opinion, the focal media outlet “artificially”differen-

tiates by issuing a lower quality score. This negative score differentiation, relative to baseline

differences between the outlets for scores issued simultaneously, increases when the other is a

more salient competitor. In sum, the timing and substance of movie and video game reviews on

the margin reflect attention to the commercial aspirations of the product and the positioning of

competitors, and not just independent judgments on newsworthiness and quality.

We posit that these results reflect the strategic tensions inherent in the intermediary market.

On the one hand, evaluators have incentives for accuracy

1

, in that systematic bias will make

the appraisals they provide less useful to customers. Conversely, as economic actors themselves

(Godes, Ofek, & Sarvary, 2009; Seamans & Zhu, 2013; Zhu & Iansiti, 2012) intermediaries face

pressure on at least two fronts. First, evaluators often rely on the entities they cover

(DellaVigna & Hermle, 2014; Gurun & Butler, 2012; Waguespack & Sorenson, 2011)—

sometimes for direct payments relating to the certifications or evaluations the intermediaries

provide, sometimes for advertising revenues, and often for timely, preferential, or exclusive

access to the information their audiences seek. Second, intermediaries compete for the attention

of audiences, and direct competition may cause them to reposition or abandon existing product

mixes (Seamans & Zhu, 2013), or imitate (Greve, 1996) or differentiate (Anand, Di Tella, &

Galetovic, 2007; Wang & Shaver, 2014) from their competitors.

The body of this note proceeds as follows: first, we briefly review the extant literature on

intermediares, describe the film and video game review context and data, and present our ana-

lyses of review publication timing and pairwise review differences between competitors. We

then discuss the results within the context of the more general literatures on firm relationships

and positioning. Finally, we conclude with a discussion of the generalizability of our findings as

well as the limitations of our study and directions for further research.

1

In this context, “accuracy”can refer either to objective standards, such as earnings estimates issued by financial

analysts, or to consistency with respect to their own established taste standards, such as when critics evaluate art.

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