Three Essays on Urban Consumer Service Firms: Evidence from Yelp

Abstract

This dissertation explores questions related to consumer services using Yelp data from the Phoenix area. Chapter 1 explores competition. Competition is a key feature of the market process assumed to improve market outcomes. But how strong is the relationship between competition and positive consumer experiences, and how does the relationship vary across space? This chapter explores these questions by exploiting Yelp data from thousands of restaurants in the Phoenix area. After controlling for restaurant characteristics, census tract level demographics, census tract xed eects, and sub-industry xed eects, the results are consistent with spatial competition positively aecting consumer experiences. Chapter 2 considers where these consumer service rms are located. The chapter analyzes the spatial concentration of a variety of consumer services rms in the Phoenix, AZ area using georeferenced Yelp data from over 29,000 establishments. Results from a K-density approach indicate substantial localization and service dierentiation among localized rms. Firm concentration varies across service cost and quality; higher quality/cost establishments tend to cluster. Chapter 3 explores the inuence of emotional cues on consumer behavior. Using nearly 1 million Yelp reviews from the Phoenix area, I empirically test for the presence of loss aversion and reference-dependent preferences in reviewer behavior. Consistent with loss aversion, unexpected losses lead to worse reviews while there is no eect for unexpected wins. The results also reect reference-dependent preferences since wins and losses in games predicted to be close do not impact reviewer behavior. Contents Acknowledgements iii List of Figures vi List of Tables vii 1 Reaching for the Stars: Competition and Consumer Reviews 1