Michael Anderson and Jeremy Magruder at the University of California, Berkley have published a new study in the Economic Journal that finds positive Yelp reviews bring in more business for restaurants in very specific ways.
They looked at 328 San Francisco restaurants and found that a restaurant with an improved rating of just half a star is between 34 to 49% more likely to sell out its 7pm reservations. The study's abstract notes that there were 'larger impacts when alternate information is more scarce' - in other words, if Yelp was the only source of information the "Yelp effect" was greater.
The economists found that because Yelp rounds its reviews to the nearest half star, restaurants that are statistically close can appear to vary in quality on the site. As The Guardian notes, "a restaurant with an average rating of 3.74 displays a 3.5-star average rating, while a restaurant with an average rating of 3.76 displays a 4-star average rating."
That difference allowed the economists to measure the effect of an extra half star and the corresponding boost it gave to restaurants.
The study also said that the restaurants got a boost even when the quality of the restaurant stayed the same.
And despite worries that restaurant owners could boost their online ratings by writing their own positive reviews, a problem CBC News has examined before, the study's authors concluded that "a rich set of robustness checks confirm that restaurants do not manipulate ratings in a confounding, discontinuous manner."
What's your take? Do you depend on online reviews to pick a restaurant?
More entries for category: Science & Technology
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