Do Social Media Dominate Government Report Cards in Influencing Consumer Choice? Evidence from U.S. Nursing Homes

48 Pages Posted: 6 Mar 2020 Last revised: 30 Mar 2021

See all articles by Yuanchen Li

Yuanchen Li

Tongji University - Advanced Institute of Business

Lauren Xiaoyuan Lu

Dartmouth College - Tuck School of Business

Susan F. Lu

Purdue University - Krannert School of Management

Date Written: March 30, 2021

Abstract

Social media have emerged as important channels to disseminate quality information to consumers in a variety of service settings. Their influence has recently spread to healthcare services, for which government report cards have long been established to disclose standardized quality information to the public. Given the presence of government report cards, do social media affect consumer choice of healthcare services? If so, which quality information channel has a stronger effect? We seek to answer these questions in the context of U.S. nursing homes by studying consumer ratings on Yelp and government ratings on Nursing Home Compare, both of which adopt a five-star quality rating scale and are accessible on the Internet. We apply the method of difference-in-differences with continuous treatment intensity and instrumental variables to conduct our analysis. Using nursing home resident admissions as the proxy for consumer choice, we find that higher Yelp ratings positively influenced consumer choice, particularly the choice of Medicare-covered consumers. Furthermore, Yelp ratings exerted a stronger effect on consumer choice than government ratings. This dominance of Yelp ratings over government ratings was stronger in markets with higher Yelp penetration or markets with lower consumer education level. Although higher Yelp ratings were associated with increased net incomes and total margins, we find little evidence that nursing homes have made quality improvement in response to their Yelp ratings.

Keywords: online consumer reviews, government report cards, consumer choice, nursing homes, healthcare, quality of care

Suggested Citation

Li, Yuanchen and Lu, Lauren Xiaoyuan and Lu, Susan Feng, Do Social Media Dominate Government Report Cards in Influencing Consumer Choice? Evidence from U.S. Nursing Homes (March 30, 2021). Available at SSRN: https://ssrn.com/abstract=3531964 or http://dx.doi.org/10.2139/ssrn.3531964

Yuanchen Li (Contact Author)

Tongji University - Advanced Institute of Business ( email )

Shanghai
China

Lauren Xiaoyuan Lu

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Susan Feng Lu

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

HOME PAGE: http://https://sites.google.com/site/susanluhome/home

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