Salience in Quality Disclosure: Evidence from the U.S. News College Rankings
AbstractHow do rankings affect demand? 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.
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Bibliographic InfoPaper provided by Harvard Business School in its series Harvard Business School Working Papers with number 12-014.
Length: 29 pages
Date of creation: Sep 2011
Date of revision:
Other versions of this item:
- Michael Luca & Jonathan Smith, 2013. "Salience in Quality Disclosure: Evidence from the U.S. News College Rankings," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(1), pages 58-77, 03.
- NEP-ALL-2011-09-22 (All new papers)
- NEP-EDU-2011-09-22 (Education)
- NEP-LAB-2011-09-22 (Labour Economics)
- NEP-SOG-2011-09-22 (Sociology of Economics)
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