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The End of Tourist Traps: A Natural Experiment on the Impact of Tripadvisor on Quality Upgrading

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  • Dante Donati

Abstract

I study how cheaper access to online review platforms, caused by the abolition of mobile roaming charges in the EU, affects consumers’ behavior and restaurants’ incentives to upgrade quality. Combining Tripadvisor data with Social Security records, I find that revenues and employment in restaurants with ex-ante higher ratings grew by 3-10% after the internet price drop. In turn, the probability for lower-rating restaurants to exit the market doubled, while surviving lower-rating establishments hired workers with higher wages and better curricula, eventually improving their online reputation. My findings have implications for the role of review platforms in markets with information asymmetries.

Suggested Citation

  • Dante Donati, 2022. "The End of Tourist Traps: A Natural Experiment on the Impact of Tripadvisor on Quality Upgrading," CESifo Working Paper Series 9834, CESifo.
    • Handle: RePEc:ces:ceswps:_9834
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    References listed on IDEAS

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    Cited by:

    1. Sabatini, Fabio, 2023. "The Behavioral, Economic, and Political Impact of the Internet and Social Media: Empirical Challenges and Approaches," IZA Discussion Papers 16703, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    review platforms; asymmetric information; search costs; service industry; quality;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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