NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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, Revised in February 2018
NBER Program(s):Industrial Organization

In 2011, Maricopa County adopted voluntary restaurant hygiene grade cards (A, B, C, D). Using inspections results between 2007 and 2013, we show that only 58 percent 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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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. citation courtesy of

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