Working Paper: NBER ID: w22710
Authors: benjamin b bederson; ginger zhe jin; phillip leslie; alexander j quinn; ben zou
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.
Keywords: quality; disclosure; unraveling; voluntary disclosure; signaling; countersignaling; restaurant hygiene
JEL Codes: D82; H75; I18; L15; L81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of the voluntary grading system (Y20) | decline in the disclosure rates of restaurant grades (D18) |
| restaurant quality (A grades) (L15) | likelihood of grade disclosure (C46) |
| higher-quality restaurants (L15) | engage in countersignaling by choosing not to disclose their grades (D82) |
| nondisclosing restaurants (L14) | would have received an A grade if they had chosen to disclose (G24) |
| restaurant quality (L15) | disclosure rates decline monotonically from A to D grades (G22) |