Here’s a very interesting little piece of economic research. Or, if you prefer, an application of the economics toolbox to an interesting situation. It has been noted that running a Groupon campaign will cut the Yelp rating of the merchant that runs it. Given that this is so obviously we’d all like to know why.

The first and most obvious problem here is that a drop in the Yelp rating could lead to more of a loss in business than the Groupon campaign brings in. Something that rather depends upon how much business comes in through Yelp and how sensitive that source of business is to the rating. That will obviously depend upon the particular circumstances of the particular business making the offer.

This research is only looking at the why the rating falls. There are a number of possible theories as to why it does:

 
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