Within the hospitality sector, restaurants face growing pressure to integrate sustainable practices while maintaining economic viability. Two fundamental questions remain: do sustainability practices command price premiums, and does this relationship vary across market segments? This study employs dictionary-based text analysis to quantify sustainability practices from approximately 4.4 million consumer reviews spanning 38,930 U.S. restaurants (2018–2023). We make two methodological contributions: First, we identify a measurement artifact—sigmoid normalization applied to sparse keyword data can inflate regression coefficients by 25–44×—and we propose a log-density transformation that preserves measurement validity. Second, using hedonic pricing models with city and cuisine fixed effects, ordered logit specifications, and interaction models, we document a monotonically decreasing relationship between restaurant quality and sustainability-associated price premiums. Lower-rated establishments (4.0 stars) exhibit −2.06%. The interaction between sustainability and star rating is strongly negative (βint=−0.042, p<0.001), indicating that sustainability’s marginal pricing association diminishes by approximately 4.2 percentage points per additional star. These results suggest that sustainability functions as a quality signal in lower-tier markets but transitions to a baseline expectation in higher-quality segments. The findings inform differentiated strategies for restaurant operators, certification bodies, and policymakers.
Liao et al. (Sat,) studied this question.