Three Essays on Urban Consumer Service Firms: Evidence from Yelp

This dissertation explores questions related to consumer services using Yelp data from the Phoenix area. Chapter 1 explores competition. Competition is a key feature of the market process assumed to improve market outcomes. But how strong is the relationship between competition and positive consumer experiences, and how does the relationship vary across space? This chapter explores these questions by exploiting Yelp data from thousands of restaurants in the Phoenix area. After controlling for restaurant characteristics, census tract level demographics, census tract fixed effects, and sub-industry fixed effects, the results are consistent with spatial competition positively affecting consumer experiences. Chapter 2 considers where these consumer service firms are located. The chapter analyzes the spatial concentration of a variety of consumer services firms in the Phoenix, AZ area using geo-referenced Yelp data from over 29,000 establishments. Results from a K-density approach indicate substantial localization and service differentiation among localized firms. Firm concentration varies across service cost and quality; higher quality/cost establishments tend to cluster. Chapter 3 explores the influence of emotional cues on consumer behavior. Using nearly 1 million Yelp reviews from the Phoenix area, I empirically test for the presence of loss aversion and reference-dependent preferences in reviewer behavior. Consistent with loss aversion, unexpected losses lead to worse reviews while there is no effect for unexpected wins. The results also reflect reference-dependent preferences since wins and losses in games predicted to be close do not impact reviewer behavior.