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Disappointment looms around the corner: Visibility and local businesses' market power

Jeanne Dall'orso, Romain Gauriot and Lionel Page ()

No 41, QuBE Working Papers from QUT Business School

Abstract: We investigate how restaurants can use high visibility locations to charge higher prices or offer lower quality to customers who are imperfectly informed and face search costs. We use a large dataset of user reviews in 10 large cities in North America and Europe. We find that prime locations in terms of visibility such as touristic locations or street intersections are associated with substantial lower customer satisfaction. This result can be explained by economic models of search. Restaurants with greater visibility face a larger number of uninformed customers and have therefore less need to rely on quality or low price to attract customers.

Keywords: Search; location; spatial analysis (search for similar items in EconPapers)
JEL-codes: D40 D82 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mkt and nep-ure
Date: 2016-06-07
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