Learning from the crowd: Regression discontinuity estimates of the effects of an online review database
| Authors | Anderson, Magruder |
| Journal | Economic Journal |
| Year | 2012 |
| Type | Published Paper |
| Abstract | Internet review forums increasingly supplement expert opinion and social networks in informing consumers about product quality. However, limited empirical evidence links digital word-of-mouth to purchasing decisions. We implement a regression discontinuity design to estimate the effect of positive Yelp.com ratings on restaurant reservation availability. An extra half-star rating causes restaurants to sell out 19 percentage points (49%) more frequently, with larger impacts when alternate information is more scarce. These returns suggest that restaurateurs face incentives to leave fake reviews but a rich set of robustness checks confirm that restaurants do not manipulate ratings in a confounding, discontinuous manner. |
| Keywords | Sports events, media, Olympics, Olympic stocks, retail investors, valuation, fundamentals, comovement, categorization, investor sentiment, investor recognition, common factor, stay-at-home, meme |
| URL | https://doi.org/10.1111/j.1468-0297.2012.02512.x |
| Tags | Archival Empirical | Consumer Decisions | Manager / Firm Behavior | Media and Textual Analysis |