Spillover effects of restaurant reviews by experts on nearby restaurants

Abstract

Previous studies on expert reviews document that restaurants with increased information visibility through expert reviews can experience more demand. However, those studies focus only on reviewed focal restaurants. In this study, not only the main effect of expert reviews on the focal restaurants, but also the spillover effect on nearby restaurants is investigated. With all possibilities open, I use the panel data constructed by the multiple sources to find out if there is any positive or negative spillover of the New York Times restaurant reviews on nearby restaurants. Using a difference-in-differences model, this paper finds that nearby restaurants had a significant reduction in the taxi traffic to their location, which can be a proxy for their revenue, after the publication of the expert reviews. This finding suggests that the demand growth of the focal restaurants after expert reviews might be due to a demand shift from their nearby restaurants.