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Consumer Reviews and Regulation: Evidence from NYC Restaurants

Author

Listed:
  • Chiara Farronato
  • Georgios Zervas

Abstract

We investigate the informativeness of hygiene signals in online reviews, and their effect on consumer choice and restaurant hygiene. We first extract signals of hygiene from Yelp. Among all dimensions that regulators monitor through mandated restaurant inspections, we find that reviews are more informative about hygiene dimensions that consumers directly experience - food temperature and pests - than other dimensions. Next, we find causal evidence that consumer demand is sensitive to these hygiene signals. We also find suggestive evidence that restaurants that are more exposed to Yelp are cleaner along dimensions for which online reviews are more informative.

Suggested Citation

  • Chiara Farronato & Georgios Zervas, 2022. "Consumer Reviews and Regulation: Evidence from NYC Restaurants," NBER Working Papers 29715, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29715
    Note: IO PR
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    File URL: http://www.nber.org/papers/w29715.pdf
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    Cited by:

    1. Boto-García, David & Balado-Naves, Roberto & Mayor, Matías & Baños-Pino, José Francisco, 2023. "Consumers' demand for operational licencing: evidence from Airbnb in Paris," Annals of Tourism Research, Elsevier, vol. 100(C).

    More about this item

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K2 - Law and Economics - - Regulation and Business Law
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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