(The) double-edge effect of expert review

Abstract

Quality information plays an important role in the decision-making process, especially for experience goods. The research identified the impact of expert quality information on demand in the restaurant industry. By using restaurant review data from the Michelin Guides, New York Times and Yelp, New York City’s yellow taxi trip record data, and restaurant information, I found that gaining new Michelin stars made restaurants experienced a 4.7% increase in demand. However, restaurants losing Michelin stars experienced a nearly 9% decrease in demand. Additionally, I found that the increase in demand caused by gaining stars in the Michelin Guide occurred prominently in low-priced restaurants. Meanwhile, the decrease in demand caused by losing stars in the Michelin Guide happened regardless of the restaurant's price range. Expert quality information appears to have great economic value. The findings indicated that restaurants should make a substantial effort to continue to be selected by the Michelin Guide after newly gaining Michelin stars because their past reputation does not last forever. Restaurants also need to consider how to use expert reviews for their marketing strategies.