Review for Professional Service: A Blessing or Curse?

This paper proposes a theoretical framework to understand how reviews for professional services, such as those provided by physicians or lawyers, differ from reviews for traditional products. Professional services have certain unique features compared to traditional products such as: (1) customers usually do not have the expertise to judge the effort or quality of the service provider; (2) the outcome of the service depends not only on the provider, but also on the customer. For example, whether a disease can be treated depends not only on the physician’s effort, but also on the complexity of the disease and the patient’s condition; (3) while customers usually lack the professional knowledge to evaluate the quality of the service other than observing the outcome, service providers can often choose which customers to serve and thus avoid certain customers. Such features make it inappropriate to interpret the reviews for service the same way as the review for commodity. More specifically, we examine whether and when online reviews for professional service can help differentiate service providers (SPs) with different quality levels. We find that when customers rely on online review to choose SPs, customers who are less likely to produce desirable review outcomes may not be served, even when online reviews are sufficient to differentiate the SPs. We examine different policies to help resolve this problem. We find that forbidding the service provider to reject customers can effectively reduce the size of “lost” customer, while customers may still suffer from undifferentiated service providers. The other policy, educating more customers to make correct choices, may neither make the market more differentiated nor completely avoid customers being refused.