Incomplete Disclosure: Evidence of Signaling and Countersignaling

46 Pages Posted: 10 Oct 2016 Last revised: 22 Jul 2021

See all articles by Benjamin Bederson

Benjamin Bederson

University of Maryland

Ginger Zhe Jin

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Phillip Leslie

University of California, Los Angeles (UCLA) - Anderson School of Management

Alexander Quinn

Purdue University

Ben Zou

Michigan State University - Department of Economics

Date Written: October 2016

Abstract

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.

Suggested Citation

Bederson, Benjamin and Jin, Ginger Zhe and Leslie, Phillip and Quinn, Alexander and Zou, Ben, Incomplete Disclosure: Evidence of Signaling and Countersignaling (October 2016). NBER Working Paper No. w22710, Available at SSRN: https://ssrn.com/abstract=2850225

Benjamin Bederson (Contact Author)

University of Maryland ( email )

College Park
College Park, MD 20742
United States

Ginger Zhe Jin

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3484 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Phillip Leslie

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Alexander Quinn

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

Ben Zou

Michigan State University - Department of Economics ( email )

East Lansing, MI 48824
United States

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