Incomplete Disclosure: Evidence of Signaling and Countersignaling

Benjamin B. Bederson, Ginger Zhe Jin, Phillip Leslie, Alexander J. Quinn, Ben Zou

NBER Working Paper No. 22710
Issued in October 2016
NBER Program(s):Industrial Organization

In 2011, Maricopa County, Arizona adopted voluntary restaurant hygiene grade cards (A, B, C, D). Using inspections results between 2007 and 2013, we show that only 58% of the subsequent inspections led to online grade posting. Although the disclosure rate in general declines with inspection outcome, higher-quality A restaurants are less likely to disclose than lower-quality As. After examining potential explanations, we believe the observed pattern is best explained by a mixture of signaling and countersignaling: the better A restaurants use nondisclosure as a countersignal, while worse As and better Bs use disclosure to stand out from the other restaurants.

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Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22710

Published: Benjamin B. Bederson & Ginger Zhe Jin & Phillip Leslie & Alexander J. Quinn & Ben Zou, 2018. "Incomplete Disclosure: Evidence of Signaling and Countersignaling," American Economic Journal: Microeconomics, vol 10(1), pages 41-66.

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