Expert Opinion and Product Quality: Evidence From New York City Restaurants

Abstract

We analyze whether consumers' quality perception and/or producer investment of New York City restaurants, measured by Zagat scores, responds to newly appearing expert opinion, measured by Michelin scores. Answering this question is of general economic interest as it applies to all markets with information asymmetries. Employing a difference-in-differences approach as well as a propensity score matching approach we find significant Michelin treatment effects on food and décor quality. Based on these changes, we find a Michelin-induced price increase of approximately 30% per Michelin star. To examine whether the improved food and nonfood quality is based on restaurant investments or is merely imagined, we analyze nonfood investments by referring to Wine Spectator wine list awards. Our analysis suggests that Michelin-reviewed restaurants are significantly more likely to invest in their wine list than others. As a result, Michelin reviewed restaurants are more likely to improve food and nonfood (esp. décor) quality leading to significant price increases. However, while restaurants that increase prices only due to décor and service improvements are more likely to go out of business, food improvements appear to secure a restaurant's survival. (JEL D11, L15, L66)

Restaurant quality: the case of Central Slovenian region

“…The first presents and compares different expert systems for assessing quality in the restaurants. Johnson et al (2005), Davis (2009), Gergaud et al (2015 and Goodsir et al (2014) have made similar attempts to demonstrated scope and content of different expert systems, with varying degrees of clarity on the subject.…”

“…The factors that the chefs saw as contributing to their success were rigor and attention to the quality of their culinary creations, developing and maintaining effective working teams, and managing the costs and finances of the operation. Gergaud et al (2015) tried to gain information on how different ratings affect restaurant success. Their results suggest that expert opinion on the New York City restaurant market revealed only two areas for restaurants to tackle; improving food quality or improving décor.…”

“…In this paper, the primarily focus is on the expert approach, as it is considered the most influential approach for assessing restaurant quality (Stierand & Sandt, 2007;Davis, 2009;Lane, 2013;Goodsir et al, 2014;Gergaud et al, 2015).…”

“…In such cases, one looks for references to help in choosing a suitable restaurant. Academic literature refers to gastronomy guidebooks, reviews and rankings as reference sources (Mak, Lumbers & Eves, 2012;Johnston, Surlemont, Nicod & Revaz, 2005;Levine, 2007;Uran Maravić, Gračan & Zadel, 2014;Tiagoa, Amaral & Tiagoa, 2015;Gergaud, Storchmann & Verardi, 2015;Stierand & Sandt, 2007). The problem arises for how to recognize and promote the quality of those locations that are not covered by such guides and rankings.…”

“…In the literature, reference sources mentioned include restaurant reviews, restaurant assessments, restaurant ratings and similar (Ferguson, 2008;Levine, 2007;Hickman, 2008;Davis, 2009;Goodsir, Neill, Williamson and Brown, 2014;Gergaud et al, 2015). For the purpose of this paper, the term -restaurant assessment system -will be used.…”