Social interactions are becoming increasingly central to the day-to-day operations of digital platforms. In this study, we investigate how negative peer feedback shapes user behavior in an online review platform. Leveraging fine-grained digital trace data of users throughout their tenure on the platform, we find interesting insights regarding the impact of negative peer feedback. First, negative feedback improves user retention on the platform relative to users who receive no feedback at all. Moreover, for users who are retained and write their next reviews, we find that negative feedback improves review frequency and quality. These novel findings demonstrate that, contrary to the conventional wisdom, negative peer feedback can benefit the platform's welfare as it increases user engagement and retention, and that no feedback can be a worse alternative.
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