The volume of e-commerce continues to expand rapidly across the entire world.
The ease of such transactions comes at a cost, however, which is the inability to physically inspect merchandise prior to purchase, as well as decreased convenience of returns of defective or unsatisfactory products. This is why online reviews have become such a central part of the e-shopping process - many consumers refuse to make a purchase unless the product has received a high rating. But can we trust the reviews that we read?
Online reviews are an unusual service from an economics perspective for several reasons. Many of the traditional economic principles do not apply, meaning that we have to look for unconventional ways of improving quality.
The first issue with online reviews is that it is impossible to give people an incentive to deliver accurate ones. Ultimately, how you feel about the quality of a product is your personal opinion, formed within your mind. Nobody can demonstrate that you are lying; even if you give inconsistent opinions over time, you can justifiably claim that you have changed your mind. Thus, even if someone paid you to express your opinion, they have no way of ensuring that what you outwardly express is the truth.
The second issue is that people have intrinsic incentives to provide online reviews for free. A minority of consumers will take the time to express their opinion, and these are the opinions that you ultimately benefit from when you make your own purchases. The problem is that the intrinsic incentives to provide online reviews are not distributed evenly across all opinions. Instead, people with extreme opinions have a strong intrinsic motivation to express it.
This is especially true in the negative domain. Humans have a natural tendency to react much more adversely to negative stimuli than they are to react favourably toward positive stimuli, including the sometimes cathartic experience of expressing your disgust for a bad product over the internet. This means that voluntary reviews are not representative of the underlying reality of opinions.
You probably already realise this, and make an adjustment in your mind, such as reducing the weight you place on bad reviews. However, this process is undermined by the fact that various groups have an incentive to articulate inaccurate opinions. The vendors may fabricate positive reviews, and their competitors may fabricate negative reviews.
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A recent study by Dina Mayzlin (University of Southern California), Yaniv Dover (Hebrew University), and Judith Chevalier (Yale University) demonstrated this subversion of the review process very clearly. Travel website TripAdvisor allows travellers to review hotels even without a booking, while Expedia requires a booking via the website. The authors found that hotels that had a neighbouring competitor were much more likely to have a 1 or 2-star review on TripAdvisor than on Expedia, most likely as a result of efforts at reputational sabotage.
False reviews leave consumers lost, and causes serious damage to honest sellers who are trying to earn a living. What can be done to tackle these problems?
Online exchanges have made significant progress in addressing the problem. They use techniques such as rater reputations (Amazon), requiring purchases (Expedia), and monitoring the activity of accounts suspected of false reviews (eBay). While not perfect, on the whole, such methods have allowed consumers to feel confident that online reviews reflect real opinions, especially when shopping at major retailers such as Amazon.
But what about the issue of ensuring that online reviews are representative of all purchasers, and not just ones who were extremely happy or unhappy? A study by Ioana Marinescu (University of Pennsylvania), Nadav Klein (University of Chicago), Andrew Chamberlain (Glassdoor - an online recruiter), and Morgan Smart (also Glassdoor) sheds light on the issue.
The authors conduct a series of experiments to compare a baseline situation where online reviews are voluntary, with alternative situations where an incentive is given to users. They work Glassdoor, which allows employees to review employers. They initially hypothesise that reviews are biased toward the negative component of the spectrum, because disgruntled employees are more likely to take the time to volunteer a review than ones who feel satisfied.
The study found that when employees were given a small financial incentive to deliver a review, participation in the review process was significantly higher. Moreover, they found that the reviews were, on average, more positive than the reviews that would emerge if the website relied exclusively on voluntary reviews. They found a similar effect of a non-monetary incentive, which was a short message urging employees to review employers on pro-social grounds (helping to identify good employers and punish bad ones).
Notably, the financial incentives necessary to induce reviews were not particularly large. For this reason, if this result is replicated by other teams of researchers, or by companies conducting their own field experiments, you should expect to start being offered financial incentives to review products that you have purchased, or possibly even messages reminding you of the benefits to other users of your providing an accurate appraisal of your purchases.
Omar Al-Ubaydli (@omareconomics) is a researcher at Derasat, Bahrain.
Company profile
Date started: 2015
Founder: John Tsioris and Ioanna Angelidaki
Based: Dubai
Sector: Online grocery delivery
Staff: 200
Funding: Undisclosed, but investors include the Jabbar Internet Group and Venture Friends
How to come clean about financial infidelity
- Be honest and transparent: It is always better to own up than be found out. Tell your partner everything they want to know. Show remorse. Inform them of the extent of the situation so they know what they are dealing with.
- Work on yourself: Be honest with yourself and your partner and figure out why you did it. Don’t be ashamed to ask for professional help.
- Give it time: Like any breach of trust, it requires time to rebuild. So be consistent, communicate often and be patient with your partner and yourself.
- Discuss your financial situation regularly: Ensure your spouse is involved in financial matters and decisions. Your ability to consistently follow through with what you say you are going to do when it comes to money can make all the difference in your partner’s willingness to trust you again.
- Work on a plan to resolve the problem together: If there is a lot of debt, for example, create a budget and financial plan together and ensure your partner is fully informed, involved and supported.
Carol Glynn, founder of Conscious Finance Coaching
Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
The specs
Engine: 1.5-litre 4-cyl turbo
Power: 194hp at 5,600rpm
Torque: 275Nm from 2,000-4,000rpm
Transmission: 6-speed auto
Price: from Dh155,000
On sale: now
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
More from Neighbourhood Watch
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
RedCrow Intelligence Company Profile
Started: 2016
Founders: Hussein Nasser Eddin, Laila Akel, Tayeb Akel
Based: Ramallah, Palestine
Sector: Technology, Security
# of staff: 13
Investment: $745,000
Investors: Palestine’s Ibtikar Fund, Abu Dhabi’s Gothams and angel investors
'Saand Ki Aankh'
Produced by: Reliance Entertainment with Chalk and Cheese Films
Director: Tushar Hiranandani
Cast: Taapsee Pannu, Bhumi Pednekar, Prakash Jha, Vineet Singh
Rating: 3.5/5 stars
The biog:
From: Wimbledon, London, UK
Education: Medical doctor
Hobbies: Travelling, meeting new people and cultures
Favourite animals: All of them
2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, (Leon banned).
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
