Michael Luca’s work illustrated how the ratings changed the nature of the market in more subtle ways. It showed how, as the coverage level of yelp.com increased in given areas, it disproportionately drove the growth of small, independent restaurants, whereas large chains were largely unaffected. In retrospect, we can see why. Imagine you are choosing a restaurant for lunch tomorrow. Chances are you have a good idea about the kind of food and service you will get in a familiar chain like Pizza Hut, but you know much less about the small independent pizza places around the corner. Is it worth taking a chance on one of the small independents? If you don’t know anything much about them, maybe not. But if you could find out how others had found them –and that they liked it –you might try one of them out.
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