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Incomplete Disclosure: Evidence of Signaling and Countersignaling

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

American Economic Journal: Microeconomics, 2018, vol. 10, issue 1, 41-66

Abstract: In 2011, Maricopa County adopted voluntary restaurant hygiene grade cards (A, B, C, D). Using inspection 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.

JEL-codes: D82 H75 I18 L15 L83 L88 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/mic.20150178
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Working Paper: Incomplete Disclosure: Evidence of Signaling and Countersignaling (2016) Downloads
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