2012/01/16 by Michael Anderson, Jeremy Magruder · 10 citations
Social Sciences · Business, Management and Accounting · #Media Influence and Politics #Digital Marketing and Social Media #Consumer Market Behavior and Pricing
paper · doi:10.1111/j.1468-0297.2012.02512.x
Internet review forums increasingly supplement expert opinion and social networks in informing consumers about product quality. However, limited empirical evidence links digital word‐of‐mouth to purchasing decisions. We implement a regression discontinuity design to estimate the effect of positive Yelp.com ratings on restaurant reservation availability. An extra half‐star rating causes restaurants to sell out 19 percentage points (49%) more frequently, with larger impacts when alternate information is more scarce. These returns suggest that restaurateurs face incentives to leave fake reviews but a rich set of robustness checks confirm that restaurants do not manipulate ratings in a confounding, discontinuous manner.