IDEAS home Printed from https://ideas.repec.org/a/bla/jindec/v70y2022i2p294-322.html

Social learning and local consumption amenities: Evidence from Yelp

Author

Listed:
  • Elliot Anenberg
  • Chun Kuang
  • Edward Kung

Abstract

We estimate the effect of social learning through Yelp on average restaurant quality across different types of markets. We use a regression discontinuity design to show that restaurants are more likely to exit receiving low ratings on Yelp. The effects of ratings on exit are especially strong for restaurants in zipcodes with high Yelp usage (e.g. more urban neighborhoods with higher income and education). Simulations show that in the long‐run, the selective restaurant exit caused by Yelp increases average restaurant quality by 0.098 Yelp stars in the average zipcode, and by at least 0.238 stars in high usage markets.

Suggested Citation

  • Elliot Anenberg & Chun Kuang & Edward Kung, 2022. "Social learning and local consumption amenities: Evidence from Yelp," Journal of Industrial Economics, Wiley Blackwell, vol. 70(2), pages 294-322, June.
    • Handle: RePEc:bla:jindec:v:70:y:2022:i:2:p:294-322
    DOI: 10.1111/joie.12291
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/joie.12291
    Download Restriction: no
    File URL: https://libkey.io/10.1111/joie.12291?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
    2. Dara Lee Luca & Michael Luca, 2019. "Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit," NBER Working Papers 25806, National Bureau of Economic Research, Inc.
    3. Hongbin Cai & Yuyu Chen & Hanming Fang, 2009. "Observational Learning: Evidence from a Randomized Natural Field Experiment," American Economic Review, American Economic Association, vol. 99(3), pages 864-882, June.
    4. Matthew J. Holian & Matthew E. Kahn, 2015. "Household Demand for Low Carbon Policies: Evidence from California," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(2), pages 205-234.
    5. Becker, Gary S, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1109-1116, October.
    6. Sebastian Calonico & Matias D. Cattaneo & Max H. Farrell & Rocío Titiunik, 2019. "Regression Discontinuity Designs Using Covariates," The Review of Economics and Statistics, MIT Press, vol. 101(3), pages 442-451, July.
    7. Edward L. Glaeser & Scott Duke Kominers & Michael Luca & Nikhil Naik, 2018. "Big Data And Big Cities: The Promises And Limitations Of Improved Measures Of Urban Life," Economic Inquiry, Western Economic Association International, vol. 56(1), pages 114-137, January.
    8. Edward L. Glaeser & Hyunjin Kim & Michael Luca, 2019. "Nowcasting the Local Economy: Using Yelp Data to Measure Economic Activity," NBER Chapters, in: Big Data for Twenty-First-Century Economic Statistics, pages 249-273, National Bureau of Economic Research, Inc.
    9. Michael Anderson & Jeremy Magruder, 2012. "Learning from the Crowd: Regression Discontinuity Estimates of the Effects of an Online Review Database," Economic Journal, Royal Economic Society, vol. 122(563), pages 957-989, September.
    10. Anenberg, Elliot & Kung, Edward, 2015. "Information technology and product variety in the city: The case of food trucks," Journal of Urban Economics, Elsevier, vol. 90(C), pages 60-78.
    11. Fan, Ying & Ju, Jiandong & Xiao, Mo, 2016. "Reputation premium and reputation management: Evidence from the largest e-commerce platform in China," International Journal of Industrial Organization, Elsevier, vol. 46(C), pages 63-76.
    12. Enrico Moretti, 2011. "Social Learning and Peer Effects in Consumption: Evidence from Movie Sales," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(1), pages 356-393.
    13. Weijia (Daisy) Dai & Ginger Jin & Jungmin Lee & Michael Luca, 2018. "Aggregation of consumer ratings: an application to Yelp.com," Quantitative Marketing and Economics (QME), Springer, vol. 16(3), pages 289-339, September.
    14. Becker, Gary S, 1991. "A Note on Restaurant Pricing and Other Examples of Social Influences on Price," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1109-1116, October.
    15. Luís Cabral & Ali Hortaçsu, 2010. "The Dynamics Of Seller Reputation: Evidence From Ebay," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 54-78, March.
    16. Lisa George & Joel Waldfogel, 2003. "Who Affects Whom in Daily Newspaper Markets?," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 765-784, August.
    17. Ryan C. McDevitt, 2011. "Names and Reputations: An Empirical Analysis," American Economic Journal: Microeconomics, American Economic Association, vol. 3(3), pages 193-209, August.
    18. Nathan Schiff, 2015. "Cities and product variety: evidence from restaurants," Journal of Economic Geography, Oxford University Press, vol. 15(6), pages 1085-1123.
    19. Ginger Zhe Jin & Phillip Leslie, 2003. "The Effect of Information on Product Quality: Evidence from Restaurant Hygiene Grade Cards," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 409-451.
    20. Leah Platt Boustan & Robert A. Margo & Matthew M. Miller & James M. Reeves & Justin P. Steil, 2019. "Does Condominium Development Lead to Gentrification," Working Papers 2019-11, Princeton University. Economics Department..
    21. Donald R. Davis & Jonathan I. Dingel & Joan Monras & Eduardo Morales, 2019. "How Segregated Is Urban Consumption?," Journal of Political Economy, University of Chicago Press, vol. 127(4), pages 1684-1738.
    22. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
    23. Guido Imbens & Karthik Kalyanaraman, 2012. "Optimal Bandwidth Choice for the Regression Discontinuity Estimator," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(3), pages 933-959.
    24. Couture, Victor & Handbury, Jessie, 2020. "Urban revival in America," Journal of Urban Economics, Elsevier, vol. 119(C).
    25. Sinai, Todd & Waldfogel, Joel, 2004. "Geography and the Internet: is the Internet a substitute or a complement for cities?," Journal of Urban Economics, Elsevier, vol. 56(1), pages 1-24, July.
    26. Kuang, Chun, 2017. "Does quality matter in local consumption amenities? An empirical investigation with Yelp," Journal of Urban Economics, Elsevier, vol. 100(C), pages 1-18.
    27. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-209, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Edward Kung, 2020. "Innovation and Entrepreneurship in Housing," NBER Working Papers 26886, National Bureau of Economic Research, Inc.
    2. Edward Kung, 2020. "Innovation and Entrepreneurship in Housing," NBER Chapters, in: The Role of Innovation and Entrepreneurship in Economic Growth, pages 499-533, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mariana Carrera & Sofia Villas-Boas, 2023. "Generic Aversion and Observational Learning in the Over-the-Counter Drug Market," American Economic Journal: Applied Economics, American Economic Association, vol. 15(3), pages 380-410, July.
    2. Fishman, Arthur & Fishman, Ram & Gneezy, Uri, 2019. "A tale of two food stands: Observational learning in the field," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 101-108.
    3. Engström, Per & Forsell, Eskil, 2018. "Demand effects of consumers’ stated and revealed preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 150(C), pages 43-61.
    4. Kuo, Fang-Chang, 2024. "Shirking with good reputation? Evidence from hotel industry," International Journal of Industrial Organization, Elsevier, vol. 97(C).
    5. Kamal Bookwala & Caleb Gallemore & Joaquín Gómez‐Miñambres, 2022. "The influence of food recommendations: Evidence from a randomized field experiment," Economic Inquiry, Western Economic Association International, vol. 60(4), pages 1898-1910, October.
    6. Enrico Moretti, 2011. "Social Learning and Peer Effects in Consumption: Evidence from Movie Sales," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(1), pages 356-393.
    7. Rahul Singh & Moses Stewart, 2025. "Placebo Discontinuity Design," Papers 2507.12693, arXiv.org.
    8. Angelo D'Andrea, 2019. "Mayor’s wage and Public procurement," BAFFI CAREFIN Working Papers 19125, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    9. Louise Grogan & Fraser Summerfield, 2019. "Government Transfers, Work, and Wellbeing: Evidence from the Russian Old-Age Pension," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(4), pages 1247-1292, October.
    10. Wei Yang & Haiyang Li & Gaowen Kong & Dongmin Kong, 2021. "Access to finance and SMEs’ trade credit: evidence from a regression discontinuity design," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(2), pages 2997-3029, June.
    11. Crespo Cristian, 2020. "Beyond Manipulation: Administrative Sorting in Regression Discontinuity Designs," Journal of Causal Inference, De Gruyter, vol. 8(1), pages 164-181, January.
    12. Lu, Jian & Su, Xiang & Diao, Yajing & Wang, Nianxin & Zhou, Bin, 2021. "Does online observational learning matter? Empirical evidence from panel data," Journal of Retailing and Consumer Services, Elsevier, vol. 60(C).
    13. Mauricio Villamizar‐Villegas & Freddy A. Pinzon‐Puerto & Maria Alejandra Ruiz‐Sanchez, 2022. "A comprehensive history of regression discontinuity designs: An empirical survey of the last 60 years," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1130-1178, September.
    14. Legge, Stefan & Schmid, Lukas, 2013. "Rankings, Random Successes, and Individual Performance," Economics Working Paper Series 1340, University of St. Gallen, School of Economics and Political Science.
    15. Crespo Cristian, 2020. "Beyond Manipulation: Administrative Sorting in Regression Discontinuity Designs," Journal of Causal Inference, De Gruyter, vol. 8(1), pages 164-181, January.
    16. Jason Greenberg & Daniel B. Sands & Gino Cattani & Joseph Porac, 2024. "Rating systems and increased heterogeneity in firm performance: Evidence from the New York City Restaurant Industry, 1994–2013," Strategic Management Journal, Wiley Blackwell, vol. 45(1), pages 36-65, January.
    17. 'Agoston Reguly, 2021. "Discovering Heterogeneous Treatment Effects in Regression Discontinuity Designs," Papers 2106.11640, arXiv.org, revised Aug 2025.
    18. Lucia Rizzica, 2018. "Raising aspirations and higher education: evidence from the UK’s Widening Participation policy," Temi di discussione (Economic working papers) 1188, Bank of Italy, Economic Research and International Relations Area.
    19. Alberto Hidalgo & Massimo Riccaboni & Francisco J. Velázquez, 2024. "The effect of short‐term rentals on local consumption amenities: Evidence from Madrid," Journal of Regional Science, Wiley Blackwell, vol. 64(3), pages 621-648, June.
    20. Jacobsen, Grant D., 2015. "Consumers, experts, and online product evaluations: Evidence from the brewing industry," Journal of Public Economics, Elsevier, vol. 126(C), pages 114-123.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jindec:v:70:y:2022:i:2:p:294-322. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.