NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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The Impact of Prices on Firm Reputation

Michael Luca, Oren Reshef

NBER Working Paper No. 27405
Issued in June 2020
NBER Program(s):Industrial Organization, Productivity, Innovation, and Entrepreneurship

While a business's reputation can impact its pricing, prices can also impact its reputation. To explore the impact of prices on reputation, we investigate daily data on menu prices and online ratings from a large rating and ordering platform. We find that a price increase of 1% leads to a decrease of 3%-5% in the average rating. Consistent with this, the overall distribution of ratings for cheaper restaurants is similar to that of more expensive restaurants. Finally, these effects don't seem to be driven by consumer retaliation against price changes, but by changes in absolute price levels.

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Document Object Identifier (DOI): 10.3386/w27405

 
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