How Yelp is killing chain restaurants

Michael Luca of Harvard Business School has a new paper studying the effects of Yelp.com on the restaurant industry. Three big findings: First, “a one-star increase in Yelp rating leads to a 5-9 percent increase in revenue.” No surprise, good reviews help restaurants. Second, this mainly affects smaller, independent establishments. A Yelp review has no effect on an individual chain restaurant like Applebee’s, presumably because people already have firm impressions of those places.


(Farooq Naeem/AFP)

The link comes via Adam Ozimek, who notes that this sort of thing represents a real improvement in our standard of living, although one that’s hard to detect from inflation statistics and the like.

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