The Effect of Information Salience on Product Quality: Louisville Restaurant Hygiene and Yelp.com

Makofske, Matthew (2017): The Effect of Information Salience on Product Quality: Louisville Restaurant Hygiene and Yelp.com.

Abstract

In late June 2013, the city of Louisville, Kentucky, announced plans to provide restaurant health inspection data to Yelp.com for publication on their popular online consumer-review forum. These data were already publicly available on the city's website. I utilize this partnership to test whether an increase in the salience of disclosed quality information on a particular product attribute, induces sellers to improve product quality along that dimension. Consumers use Yelp to gather information on many characteristics of a restaurant's product. Consumers depend less on Yelp to learn about chain-affiliated restaurants, because much of this information is conveyed through the chain's reputation. Using data from over 11,000 Louisville restaurant health inspections, I compare health inspection performance for independent and chain-affiliated restaurants, before and after the announcement of the partnership. Controlling for a variety of factors, I estimate that this increased salience caused substantial improvement in independent restaurant hygiene. The average treatment effect is estimated to be a 12-14% decrease in health score point deductions, and a 29-37% decrease in critical violations (those deemed to be the greatest public health risk), per inspection. The effect of the Louisville-Yelp partnership on health score point deductions is entirely evident in restaurants' first inspections following its announcement, where the estimated effect is a 14-16% relative decrease.

• Item Type: MPRA Paper
• Language: English
• Keywords: cost of information acquisition, salience, mandatory disclosure, product quality, restaurant hygiene
• Subjects: I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy ; Regulation ; Public Health; K - Law and Economics > K3 - Other Substantive Areas of Law > K32 - Environmental, Health, and Safety Law; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L15 - Information and Product Quality ; Standardization and Compatibility

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