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Incomplete Disclosure: Evidence of Signaling and Countersignaling

Author

Listed:
  • 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 inspection 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

  • Benjamin B. Bederson & Ginger Zhe Jin & Phillip Leslie & Alexander J. Quinn & Ben Zou, 2018. "Incomplete Disclosure: Evidence of Signaling and Countersignaling," American Economic Journal: Microeconomics, American Economic Association, vol. 10(1), pages 41-66, February.
    • Handle: RePEc:aea:aejmic:v:10:y:2018:i:1:p:41-66
    Note: DOI: 10.1257/mic.20150178
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    Cited by:

    1. Hagenbach, Jeanne & ,, 2022. "Motivated Skepticism," CEPR Discussion Papers 17478, C.E.P.R. Discussion Papers.
    2. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2025. "Information unraveling and limited depth of reasoning," Games and Economic Behavior, Elsevier, vol. 154(C), pages 267-284.
    3. Bo Cowgill & Amanda Agan & Laura K. Gee, 2024. "The Gender Disclosure Gap: Salary History Bans Unravel When Men Volunteer Their Income," Organization Science, INFORMS, vol. 35(5), pages 1571-1588, September.
    4. Hisayuki Yoshimoto & Andriy Zapechelnyuk, 2019. "Are There 'Ratatouille' Restaurants? On Anticorrelation of Food Quality and Hygiene," Discussion Paper Series, School of Economics and Finance 202001, School of Economics and Finance, University of St Andrews, revised 05 Mar 2020.
    5. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2022. "Behavioral Forces Driving Information Unraveling," Rationality and Competition Discussion Paper Series 354, CRC TRR 190 Rationality and Competition.
    6. Montero, Maria & Sheth, Jesal D., 2021. "Naivety about hidden information: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 192(C), pages 92-116.
    7. Lane, Tom & Zhou, Minghai, 2025. "Voluntary quality disclosure in the Labour market," Journal of Economic Behavior & Organization, Elsevier, vol. 237(C).
    8. Han Zhu & Yimin Yu & Saibal Ray, 2021. "Quality Disclosure Strategy under Customer Learning Opportunities," Production and Operations Management, Production and Operations Management Society, vol. 30(4), pages 1136-1153, April.
    9. Makofske, Matthew Philip, 2025. "Anticipated monitoring, inhibited detection, and diminished deterrence," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).
    10. repec:ags:aaea22:343681 is not listed on IDEAS
    11. Yoshimoto, Hisayuki & Zapechelnyuk, Andriy, 2024. "Are there “Ratatouille” restaurants? On anticorrelation of food quality and hygiene," The Quarterly Review of Economics and Finance, Elsevier, vol. 98(C).
    12. Jeroen Nieboer, 2022. "Positional enhancement in effort-based social comparisons," Discussion Papers 2022-02, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    13. Benndorf, Volker & Kübler, Dorothea & Normann, Hans-Theo, 2025. "Information unraveling and limited depth of reasoning," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 154, pages 267-284.
    14. Makofske, Matthew P., 2024. "Anticipated Inspection, Inhibited Detection, and Diminished Deterrence," 2024 Annual Meeting, July 28-30, New Orleans, LA 343681, Agricultural and Applied Economics Association.
    15. Jiménez-Martínez, Antonio & Melguizo-López, Isabel, 2024. "Evidence disclosure with heterogeneous priors," Mathematical Social Sciences, Elsevier, vol. 132(C), pages 69-74.
    16. Harbaugh, Richmond & To, Theodore, 2020. "False modesty: When disclosing good news looks bad," Journal of Mathematical Economics, Elsevier, vol. 87(C), pages 43-55.
    17. Ginger Zhe Jin & Michael Luca & Daniel Martin, 2022. "Complex Disclosure," Management Science, INFORMS, vol. 68(5), pages 3236-3261, May.
    18. Tom Lane & Minghai Zhou, 2022. "Failure of unravelling theory? A natural field experiment on voluntary quality disclosure," Discussion Papers 2022-17, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    19. Yuelong, Zeng & Jingwen, Liu & Wenting, Feng, 2025. "Integrating high and low-status signals in product design: Effects on luxury brand preference," Journal of Business Research, Elsevier, vol. 198(C).
    20. Schmitt, Stefanie Y. & Bruckner, Dominik, 2023. "Unaware consumers and disclosure of deficiencies," Games and Economic Behavior, Elsevier, vol. 142(C), pages 1018-1042.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy

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