Consumer Reviews and Regulation: Evidence from NYC Restaurants

60 Pages Posted: 29 Mar 2022

See all articles by Chiara Farronato

Chiara Farronato

Harvard University; National Bureau of Economic Research (NBER)

Georgios Zervas

Questrom School of Business, Boston University

Multiple version iconThere are 2 versions of this paper

Date Written: March 2022

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: Online Reviews, Regulation

JEL Classification: D18, K20, L15

Suggested Citation

Farronato, Chiara and Zervas, Georgios, Consumer Reviews and Regulation: Evidence from NYC Restaurants (March 2022). CEPR Discussion Paper No. DP17102, Available at SSRN: https://ssrn.com/abstract=4069910

Chiara Farronato (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Georgios Zervas

Questrom School of Business, Boston University ( email )

United States

HOME PAGE: http://people.bu.edu/zg

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