Salience in Quality Disclosure: Evidence from the U.S. News College Rankings

20 Pages Posted: 10 Jan 2013

See all articles by Michael Luca

Michael Luca

Harvard Business School

Jonathan Smith

Georgia State University

Date Written: Spring 2013

Abstract

This paper investigates the impact of college rankings, and the visibility of those rankings, on students’ application decisions. Using natural experiments from U.S. News and World Report College Rankings, we present two main findings. First, we identify a causal impact of rankings on application decisions. When explicit rankings of colleges are published in U.S. News, a one‐rank improvement leads to a 1‐percentage‐point increase in the number of applications to that college. Second, we show that the response to the information represented in rankings depends on the way in which that information is presented. Rankings have no effect on application decisions when colleges are listed alphabetically, even when readers are provided data on college quality and the methodology used to calculate rankings. This finding provides evidence that the salience of information is a central determinant of a firm's demand function, even for purchases as large as college attendance.

Suggested Citation

Luca, Michael and Smith, Jonathan, Salience in Quality Disclosure: Evidence from the U.S. News College Rankings (Spring 2013). Journal of Economics & Management Strategy, Vol. 22, Issue 1, pp. 58-77, 2013. Available at SSRN: https://ssrn.com/abstract=2198764 or http://dx.doi.org/10.1111/jems.12003

Michael Luca (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Boston, MA 02163
United States

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=602417

Jonathan Smith

Georgia State University ( email )

GA
United States

HOME PAGE: http://https://sites.google.com/site/jonathansmithphd/

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