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Incomplete Disclosure: Evidence of Signaling and Countersignaling -- by Benjamin B. Bederson, Ginger Zhe Jin, Phillip Leslie, Alexander J. Quinn, Ben Zou

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In 2011, Maricopa County, Arizona adopted voluntary restaurant hygiene grade cards (A, B, C, D). Using inspections results between 2007 and 2013, we show that only 58% 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.

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