Social learning and local consumption amenities: Evidence from Yelp

<p>We estimate the effect of social learning through Yelp on average restaurant quality across different types of markets. We use a regression discontinuity design to show that restaurants are more likely to exit receiving low ratings on Yelp. The effects of ratings on exit are especially strong for restaurants in zipcodes with high Yelp usage (e.g. more urban neighborhoods with higher income and education). Simulations show that in the long-run, the selective restaurant exit caused by Yelp increases average restaurant quality by 0.098 Yelp stars in the average zipcode, and by at least 0.238 stars in high usage markets.</p>