Consumer Reviews and Regulation: Evidence from New York City Restaurants

We investigate the informational content of online reviews regarding hygiene standards. Using data from Yelp and New York City restaurant inspections, we show that online reviews are informative about dimensions of hygiene that consumers directly experience but provide limited information on other dimensions. We present causal evidence that restaurant demand responds to hygiene signals in online reviews and that restaurants with higher visibility on review platforms violate less along dimensions for which reviews are more informative. These findings highlight the evolving role of consumer reviews for regulators and firms.

History: Catherine Tucker served as the senior editor.

Funding: This research was supported by the authors’ research budgets at Harvard University and Boston University.

Supplemental Material: The online appendices and data files are available at https://doi.org/10.1287/mksc.2023.0088.