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On Yelp, a Half-Star Difference Can Kill Your Restaurant

Photo: jakrapong/Flickr

Two Berkeley economists took on the unfortunate task of studying Yelp and found that a half-star difference in the rating of a restaurant can make or break it as a business. Writes Gregory Ferenstein in TechCrunch, "a simple half-star improvement on Yelp's 5-star rating makes it 30-49% more likely that a restaurant will sell out its evening seats." The study (pdf), which appeared in the Economic Journal, found 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." This now contradicts another recent study that diners don't seem to care at all about Yelp reviews.

The Berkeley study focused on 328 restaurants in San Francisco and analyzed their table availability during the 6 PM to 8 PM window. It's important to note that the researchers found that Yelp doesn't affect "well-known establishments," like McDonald's or a "celebrity restaurant."

· Learning from the Crowd:Regression Discontinuity Estimates of the Effects of an Online Review Database [Berkeley via TechCrunch]
· All Yelp Wanted Coverage on Eater [-E-]