2020
Working Paper
HBS Working Paper Series

The Impact of Price on Firm Reputation

By: Michael Luca and Oren Reshef

Format:Print
| Language:English
| Pages:40

Abstract

While a business's reputation can impact its pricing, prices can also impact its reputation. To explore the effect 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.

Keywords

Pricing; Business Ventures; Reputation; Price; Consumer Behavior; Analysis

Citation

Luca, Michael, and Oren Reshef. "The Impact of Price on Firm Reputation." Harvard Business School Working Paper, No. 20-128, June 2020. (Revised December 2020.)