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Consumer Reviews and Regulation: Evidence from NYC Restaurants

Author

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  • Farronato, Chiara
  • Zervas, Georgios

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.

Suggested Citation

  • Farronato, Chiara & Zervas, Georgios, 2022. "Consumer Reviews and Regulation: Evidence from NYC Restaurants," CEPR Discussion Papers 17102, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17102
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    More about this item

    Keywords

    Regulation; Online reviews;

    JEL classification:

    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • K20 - Law and Economics - - Regulation and Business Law - - - General

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