Impact of transboundary air pollution on service quality and consumer satisfaction

Abstract This paper exploits random and exogenous transboundary haze pollution in Singapore caused by forest fires in Indonesia to examine the causal effects of air pollution on firm productivity and consumer satisfaction. To measure firm productivity in the private sector, we use the subcategory review scores on service quality, and to estimate consumer satisfaction, we use the individual-level overall online review scores. We find that a significant reduction in consumer satisfaction related to increases in haze pollutant intensity is followed by a substantial rebound in consumer satisfaction for eight months after the haze completely dissipates. We also employ sentiment analysis to illuminate review data and to uncover the underlying mechanisms: the decreased consumer satisfaction during the haze shock is caused by changing consumer mood, rather than by decreases in service quality; after the haze dissipates, consumer satisfaction is quickly restored and soon exceeds the previous level due to substantial improvements in service quality.