Read the full (Open Access!) paper here: doi.org/10.1287/mnsc...

Thanks to my co-authors, Qiaoni Shi and Shrabastee Banerjee!

Key takeaway: Introducing entry costs can reshapes the ecosystem. Platforms must weigh short-term revenue against the long-term risks of marginalizing small creators, reducing diversity, and harming consumer matching.

The Mismatch: Why lower ratings? We used a fine-tuned BERT model to analyze review text. The results suggest an increase in consumer-book mismatches.

With reduced diversity (a shrinking "long tail"), readers were more likely to receive books misaligned with their preferences.

The Demand Paradox: How did readers (demand side) respond? The promotional effects intensified, but with a paradox.

Books in the paid program received a HIGHER volume of reviews, but LOWER average ratings. Monetization amplified the "Groupon effect."

The "Rich-Get-Richer" Dynamic: Diving deeper, we saw a "rich-get-richer" effect. Popular genres (like Mystery/Thriller) became more dominant, while niche genres (like Poetry/Science) lost market share. The entry cost narrowed the range of cultural products being promoted.

The Diversity Drop: This shift in suppliers directly affected product variety. We measured a significant decline in the diversity of book genres available in the program post-monetization. The marketplace became less varied.

Market Concentration & Author Profiles: This led to a massive 200% increase in market concentration (HHI). Furthermore, the authors who continued to participate post-monetization were generally more established, popular, and experienced with the platform.

Uneven Impact & Concentration: Importantly, the impact was uneven. The cost disproportionately pushed out indie publishers and self-published authors.

While overall participation dropped, the market share of the "Big 5" publishing houses more than doubled (12% to 30%).

The Supply Shock: The impact on the supply side was immediate and dramatic. Introducing the entry cost caused the average number of monthly promotional campaigns to plummet from ~3,000 to ~1,000.

We studied the Goodreads "Giveaways" program, a marketplace for book promotion. It was free for authors/publishers until Jan 2018, when Goodreads introduced a fixed $119 entry cost.

This provided a natural experiment to study monetization in a two-sided market.

24/ An excellent recent survey revisits the theoretical literature on herds & cascades It notes that cascades cause poor information aggregation, lead to fragile mass behaviors, and remain central to understanding social learning. Those 1992 papers launched a vast literature 😎