Consumer Reviews and Regulation: Evidence from NYC Restaurants

Chiara Farronato and Georgios Zervas

No 17102, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Regulation; Online reviews (search for similar items in EconPapers)
JEL-codes: D18 K20 L15 (search for similar items in EconPapers)
Date: 2022-03
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