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Salience in Quality Disclosure: Evidence from the U.S. News College Rankings

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  • Michael Luca

    () (Harvard Business School, Negotiation, Organizations & Markets Unit)

  • Jonathan Smith

    () (Advocacy and Policy Center - College Board)

Abstract

How 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.

Suggested Citation

  • Michael Luca & Jonathan Smith, 2011. "Salience in Quality Disclosure: Evidence from the U.S. News College Rankings," Harvard Business School Working Papers 12-014, Harvard Business School.
  • Handle: RePEc:hbs:wpaper:12-014
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    1. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-1177, September.
    2. Smith Jonathan, 2013. "The Effect of College Applications on Enrollment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(1), pages 151-188, December.
    3. Amy Finkelstein, 2009. "E-ztax: Tax Salience and Tax Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 124(3), pages 969-1010.
    4. Bruce Sacerdote, 2001. "Peer Effects with Random Assignment: Results for Dartmouth Roommates," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 681-704.
    5. Stefano DellaVigna & Joshua M. Pollet, 2007. "Demographics and Industry Returns," American Economic Review, American Economic Association, vol. 97(5), pages 1667-1702, December.
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