Are Ratings Informative Signals? The Analysis of the Netflix Data 

Networks, the Internet, and Cloud Computing, Internet and Media and Content

Article Snapshot

Author(s)

Ivan Maryanchyk

Source

NET Institute Working Paper #08-22, October 2008

Summary

This paper analyzes ratings as signals of the quality of movies.

Policy Relevance

The information in this paper is key to understanding the utility and implications of ratings.

Main Points

  • The very rich Netflix data allowed for a very thorough and meaningful analysis. 

  • It made it possible to identify the effect of ratings on demand while controlling for the inherent popularity of each specific DVD using fixed effects.  The results indicate that the ratings provide signals of quality to the consumers.
 
  • This paper shows that the ratings system has economically significant value.

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