Publications
Publications
- 2020
- HBS Working Paper Series
The Impact of Price on Firm Reputation
By: Michael Luca and Oren Reshef
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
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.)