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Aggregation of Consumer Ratings: An Application to Yelp.com

Author

Listed:
  • Weijia Dai

    (University of Maryland)

  • Ginger Jin

    (University of Maryland)

  • Jungmin Lee

    (Sogang University)

  • Michael Luca

    (Harvard Business School, Negotiation, Organizations & Markets unit)

Abstract

Because consumer reviews leverage the wisdom of the crowd, the way in which they are aggregated is a central decision faced by platforms. We explore this "rating aggregation problem" and offer a structural approach to solving it, allowing for (1) reviewers to vary in stringency and accuracy, (2) reviewers to be influenced by existing reviews, and (3) product quality to change over time. Applying this to restaurant reviews from Yelp.com, we construct an adjusted average rating and show that even a simple algorithm can lead to large information efficiency gains relative to the arithmetic average.

Suggested Citation

  • Weijia Dai & Ginger Jin & Jungmin Lee & Michael Luca, 2012. "Aggregation of Consumer Ratings: An Application to Yelp.com," Harvard Business School Working Papers 13-042, Harvard Business School, revised Nov 2017.
    • Handle: RePEc:hbs:wpaper:13-042
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    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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