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

Author

Listed:
  • Michael Luca

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

  • Georgios Zervas

    () (Boston University)

Abstract

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.

Suggested Citation

  • Michael Luca & Georgios Zervas, 2013. "Fake It Till You Make It: Reputation, Competition, and Yelp Review Fraud," Harvard Business School Working Papers 14-006, Harvard Business School, revised May 2015.
  • Handle: RePEc:hbs:wpaper:14-006
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    References listed on IDEAS

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    1. Dina Mayzlin & Yaniv Dover & Judith A. Chevalier, 2012. "Promotional Reviews: An Empirical Investigation of Online Review Manipulation," NBER Working Papers 18340, National Bureau of Economic Research, Inc.
    2. Weijia Dai & Ginger Z. Jin & Jungmin Lee & Michael Luca, 2012. "Aggregation of Consumer Ratings: An Application to Yelp.com," NBER Working Papers 18567, National Bureau of Economic Research, Inc.
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    7. Chrysanthos Dellarocas, 2006. "Strategic Manipulation of Internet Opinion Forums: Implications for Consumers and Firms," Management Science, INFORMS, vol. 52(10), pages 1577-1593, October.
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    Cited by:

    1. Dobrescu, Loretti I. & Luca, Michael & Motta, Alberto, 2013. "What makes a critic tick? Connected authors and the determinants of book reviews," Journal of Economic Behavior & Organization, Elsevier, vol. 96(C), pages 85-103.
    2. repec:eee:tefoso:v:125:y:2017:i:c:p:66-76 is not listed on IDEAS
    3. Michael Luca, 2016. "Designing Online Marketplaces: Trust and Reputation Mechanisms," Harvard Business School Working Papers 17-017, Harvard Business School.
    4. Alex Wood-Doughty, 2016. "Do Employers Learn from Public, Subjective, Performance Reviews?," Working Papers 16-11, NET Institute.
    5. repec:eee:touman:v:58:y:2017:i:c:p:51-65 is not listed on IDEAS
    6. Benjamin Edelman & Micahel Luca, 2014. "Digital Discrimination: The Case of Airbnb.com," Harvard Business School Working Papers 14-054, Harvard Business School.
    7. Amedeo Piolatto, 2015. "Online booking and information: competition and welfare consequences of review aggregators," Working Papers 2015/11, Institut d'Economia de Barcelona (IEB).

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