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1 Jin-Leslie paper, G604, Rasmusen, April 21, 2003.

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Presentation on theme: "1 Jin-Leslie paper, G604, Rasmusen, April 21, 2003."— Presentation transcript:

1 1 Jin-Leslie paper, G604, Rasmusen, April 21, 2003

2 2 Central Question: “The central question of this study is: when there is an increase in the provision of information to consumers about firms’ products (e.g. product quality information), does this cause firms to change their behavior (e.g. improve their product quality?)” (p. 1) The dataset has exogenous variation, via 3 regimes: 1. Voluntary disclosure without a standard format 2. Voluntary disclosure with a standard format 3. Mandatory disclosure with a standard format

3 3 The Literature Stigler (1961) Search paper Nelson (1970) Advertising Nelson (1974) Ads as signals Benham (1972) eyeglass advertising bans Mathios (2000) J. of Law and Economics, salad dressing fat content. Demand fell for salad dressing. Jin (2000), under revision for RAND J. of Economics, HMO’s. ???

4 4 History July 1, 1997: Subjective part of inspection report eliminated. November : TV three-part report on unclean restaurant kitchens December 16, 1997: Los Angeles County Board of Supervisors unanimously votes for a grade card ordinance January 16, 1998: All restaurants get grade cards. In unincorporated parts of LA County, and some incorporated parts, restaurants must post the grade cards.

5 5 Conclusions 1. No restaurants voluntarily disclosed their quality before the grade cards 2. Quality rose with the new grade cards, whether disclosure was voluntary or mandatory 3. Mandatory disclosure made quality rise more 4. Prices went down and output rose, in addition to the quality increase


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