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
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
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