Publications
Publications
- July 2021
- Management Science
The Effect of Price on Firm Reputation
By: Michael Luca and Oren Reshef
Abstract
While a business's reputation can affect its pricing, prices can also affect 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; Reputation Systems; IT Policy And Management; Economics Of Digital Platforms; Business Ventures; Reputation; Price; Consumer Behavior; Analysis
Citation
Luca, Michael, and Oren Reshef. "The Effect of Price on Firm Reputation." Management Science 67, no. 7 (July 2021).