Hope Hurts: Expectations-based Reference Dependence in Yelp Review

33 Pages Posted: 24 Jul 2021 Last revised: 15 Apr 2024

See all articles by Ying-Kai Huang

Ying-Kai Huang

University of Pittsburgh - Department of Economics

Min-heng Wang

National Taiwan University

Shuyan Zhan

affiliation not provided to SSRN

Date Written: July 22, 2021

Abstract

This paper integrates applied econometrics, machine learning, and theories of behavioral economics to test whether dining in a restaurant on special occasions—such as birthdays, anniversaries, or graduations—affects customer expectations and leads to lower ratings of their dining experiences. Moreover, our study aligns with the emerging literature on attribution bias in economics and psychology, providing empirical evidence on expectation-based reference dependence. In our analysis, we examine Yelp reviews and combine text analysis with regression, mediation analysis, and causal machine learning techniques. Our models reveal that consumers tend to give lower ratings to restaurants visited on special occasions. This finding can be attributed to expectation-based reference dependence, wherein individuals hold higher expectations for restaurants on special occasions and subsequently misattribute their dissatisfaction to the quality of the restaurant. By linking our empirical findings with theories of attribution bias, this paper demonstrates how expectation-based reference dependence shapes people’s perceptions and behaviors. We have also developed corresponding marketing strategies based on these insights.

Keywords: Behavioral Economics, Attribution Bias, Reference Dependence, Expectation Disconfirmation, Online Rating Systems, Causal Machine Learning

JEL Classification: D91, D83, D12

Suggested Citation

Huang, Ying-Kai and Wang, Min-heng and Zhan, Shuyan, Hope Hurts: Expectations-based Reference Dependence in Yelp Review (July 22, 2021). Available at SSRN: https://ssrn.com/abstract=3891195 or http://dx.doi.org/10.2139/ssrn.3891195

Ying-Kai Huang (Contact Author)

University of Pittsburgh - Department of Economics ( email )

4901 Wesley Posvar Hall
230 South Bouquet Street
Pittsburgh, PA 15260
United States

HOME PAGE: http://https://sites.google.com/view/ying-kai-huang/about-me

Min-heng Wang

National Taiwan University ( email )

No. 1, Sec. 4, Roosevelt Rd.
Taipei City
Taiwan

Shuyan Zhan

affiliation not provided to SSRN

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
321
Abstract Views
2,213
Rank
177,686
PlumX Metrics