Harvard Business School
Michael Luca
Known for:Economist who pioneered causal research on the revenue impact of online reviews, using Yelp rating discontinuities to isolate the effect of consumer-facing star ratings on restaurant revenue
Key findings
- 2016
Luca used a natural experiment in Yelp's rounding algorithm — which rounds displayed ratings to the nearest half-star — to create a regression discontinuity design. Restaurants just above a rounding threshold (gaining an extra visible half-star) showed 5–9% higher revenue than restaurants just below, demonstrating that the causal effect of online ratings on restaurant revenue is substantial and economically significant, particularly for independent restaurants without brand recognition. ↗