What Do Consumers Learn from Regulator Ratings? Evidence from Restaurant Hygiene Quality Disclosures

36 Pages Posted: 7 Nov 2018 Last revised: 16 Mar 2019

Date Written: March 13, 2019

Abstract

Across a range of industries, regulators use ratings to inform consumers about firms and products. Using online experiments, we investigate two pathways through which individuals extract the information communicated by such ratings: beliefs about the distribution of ratings (e.g., how often good ratings are given) and expertise about what factors determine a good rating. We provide evidence that failures along either pathway can lead to systematic misperceptions of the informational content of regulatory ratings, which can then distort a consumer’s willingness to pay for a product with a particular rating.

Keywords: Disclosure, Ratings, Certification

Suggested Citation

Kim, Tami and Martin, Daniel, What Do Consumers Learn from Regulator Ratings? Evidence from Restaurant Hygiene Quality Disclosures (March 13, 2019). Available at SSRN: https://ssrn.com/abstract=3278399 or http://dx.doi.org/10.2139/ssrn.3278399

Tami Kim

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Daniel Martin (Contact Author)

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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