Working Paper | 2013

Fake It Till You Make It: Reputation, Competition, and Yelp Review Fraud

by Michael Luca and Georgios Zervas

Abstract

Consumer reviews are now a part of everyday decision-making. Yet the credibility of reviews is fundamentally undermined when business-owners commit review fraud, either by leaving positive reviews for themselves or negative reviews for their competitors. In this paper, we investigate the extent and patterns of review fraud on the popular consumer review platform Yelp.com. Because one cannot directly observe which reviews are fake, we focus on reviews that Yelp's algorithmic indicator has identified as fraudulent. Using this proxy, we present four main findings. First, roughly 16 percent of restaurant reviews on Yelp are identified as fraudulent, and tend to be more extreme (favorable or unfavorable) than other reviews. Second, a restaurant is more likely to commit review fraud when its reputation is weak, i.e., when it has few reviews, or it has recently received bad reviews. Third, chain restaurants — which benefit less from Yelp — are also less likely to commit review fraud. Fourth, when restaurants face increased competition, they become more likely to leave unfavorable reviews for competitors. Taken in aggregate, these findings highlight the extent of review fraud and suggest that a business's decision to commit review fraud responds to competition and reputation incentives rather than simply the restaurant's ethics.

Keywords: Information; Competition; Internet; Ethics; Reputation; Social and Collaborative Networks; Retail Industry; Food and Beverage Industry;

Citation:

Luca, Michael, and Georgios Zervas. "Fake It Till You Make It: Reputation, Competition, and Yelp Review Fraud." Working Paper, September 2013. (Revise and resubmit, Management Science.)