We study the impact on consumer financial health of the widespread legalization of sports betting in the United States, which began in 2018. We use the state-by-state rollout of legal betting combined with a large representative dataset on consumer credit outcomes to identify effects. We find that states with legal sports betting, particularly online or mobile betting, experienced small decreases in credit scores, as well as large increases in some indicators of excessive debt, including bankruptcies and debt sent to collection agencies. These adverse outcomes are overwhelmingly concentrated among consumers with poor financial health prior to gambling legalization.

We study the market for fake product reviews on Amazon.com. These reviews are purchased in large private internet groups on Facebook and other sites. We hand-collect data on these markets to characterize the types of products that buy fake reviews and then collect large amounts of data on the ratings and reviews posted on Amazon for these products, as well as their sales rank, advertising, and pricing behavior. We use this data to assess the costs and benefits of fake reviews to sellers and evaluate the degree to which they harm consumers. The theoretical literature on review fraud shows conditions when they harm consumers and conditions where they function as simply another type of advertising. Using detailed data on product outcomes before and after they buy fake reviews we can directly determine if these are low-quality products using fake reviews to deceive and harm consumers or if they are high-quality products that solicit reviews to establish reputations. We find that a wide array of products purchase fake reviews, including products with many reviews and high average ratings. Buying fake reviews on Facebook leads to a significant increase in average rating and sales rank, but the effect disappears after roughly one month. After firms stop buying fake reviews their average ratings fall significantly and the share of one-star reviews increases significantly, indicating fake reviews are mostly used by low quality products and are deceiving and harming consumers. Finally, we observe that Amazon deletes large numbers of reviews and we document their deletion policy.

Over the last fifteen years, one of the major developments online has been the growth and proliferation of review websites such as TripAdvisor. The ready availability of independent information from past users poses interesting questions for marketing strategy. What role does advertising play in the new environment? How should firms adjust their advertising strategy to the presence of reviews? In this paper we address these questions in the context of the hotel industry. Using a data set of TripAdvisor hotel reviews and another describing hotels' advertising expenditures, we show, first, that overall ad spending decreased from 2002 to 2015, suggesting that online reviews have had the effect of displacing advertising. Second, there is a negative causal relationship between TripAdvisor ratings and advertising spending in the cross-section: hotels with higher ratings spend less. This suggests that user ratings and advertising are substitutes, not complements. Third, this relationship is stronger for independent hotels than for chains, and stronger in competitive markets than in noncompetitive markets. The former suggests that a strong brand name provides some immunity to reviews, and the latter suggests that when ratings are pivotal, the advertising response might be particularly strong. Finally, we show that the relationship between user ratings and advertising has strengthened over time, as websites such as TripAdvisor have become more influential. This provides further confirmation that the effect of online ratings on advertising operates through the demand side, and not the supply side. Hotels seem to react to reviews if and only if consumers react to them.