Agglomeration Density and Business-Customer Matching Open Access

Xu, Mingtao (2015)

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Studies in agglomeration have shown that agglomeration can benefit businesses by enhancing their productivity. In this paper, I examine the relationship between agglomeration density and customers' evaluation of businesses and propose a mechanism that represents a non-productivity benefit of agglomeration. In an urban setting, I argue that when businesses offer differentiated products and services and customers have different preferences, agglomeration of businesses provides customers with more diverse choices, enables them to try different products and services and find the ones that match their preferences the best. The outcome is that customers evaluate businesses more positively. This study uses Yelp data on chain restaurants, users, and reviews to test these propositions.

Table of Contents

Introduction 1

Theory and Hypotheses 4

Empirical Strategy 10

Data 11 Variables and Measurements 13

Methods 25

Results 26

Discussion 28

Additional Studies 29

Concluding Remarks 31

Limitations 32

References 34

Appendix 1. Logics of Business-Customer Matching 38

Appendix 2. Testing Mediation Effects 40

Appendix 3. Review-level Analyses 41

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