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Our results suggests that design changes in how platforms present product ratings information can substantially shape the incentives for firms selling on a market platform and promote the sale of more responsible products.

Experimental results confirm that bundling ratings increases green investment substantially, in our specific setup by 15%–32% percentage points, while maintaining product quality investment and consumer purchasing behavior at similar high levels.

However, when externality labels and quality ratings are bundled into a single score, firms are likely to invest in both high product quality and lower externalities, even without widespread consumer activism for sustainability.

We show theoretically that when sustainability ratings/labels are displayed separately, firms selling on a platform invest in externality reduction only if enough consumers condition their purchase on the sustainability label.

Our research explores whether integrating e.g. sustainability information directly into consumer product ratings—rather than displaying this information as separate ecolabels—can incentivize firms to reduce negative externalities.

How could product ratings be used to help market platforms sell more responsible products, even if most consumers don't condition their purchases on any added green labels?

See the latest working paper version here: drive.google.com/file/d/1fA2n...