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Fake It Till You Make It: Reputation, Competition, and Yelp Review Fraud

  • Michael Luca


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

  • Georgios Zervas


    (Boston University)

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    Consumer reviews are now part of everyday decision-making. Yet, the credibility of these reviews is fundamentally undermined when businesses commit review fraud, creating fake reviews for themselves or their competitors. We investigate the economic incentives to commit review fraud on the popular review platform Yelp, using two complementary approaches and datasets. We begin by analyzing restaurant reviews that are identified by Yelp's filtering algorithm as suspicious, or fake ? and treat these as a proxy for review fraud (an assumption we provide evidence for). We present four main findings. First, roughly 16% of restaurant reviews on Yelp are filtered. These reviews tend to be more extreme (favorable or unfavorable) than other reviews, and the prevalence of suspicious reviews has grown significantly over time. Second, a restaurant is more likely to commit review fraud when its reputation is weak, i.e., when it has few reviews, or it has recently received bad reviews. Third, chain restaurants ? which benefit less from Yelp ? are also less likely to commit review fraud. Fourth, when restaurants face increased competition, they become more likely to receive unfavorable fake reviews. Using a separate dataset, we analyze businesses that were caught soliciting fake reviews through a sting conducted by Yelp. These data support our main results, and shed further light on the economic incentives behind a business's decision to leave fake reviews.

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    Paper provided by Harvard Business School in its series Harvard Business School Working Papers with number 14-006.

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    Length: 35 pages
    Date of creation: Jul 2013
    Date of revision: May 2015
    Handle: RePEc:hbs:wpaper:14-006
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