Three essays on quality disclosure

This dissertation empirically investigates the way that consumers acquire and process information about product quality, as well as the way that this information is produced.;Chapter one investigates the impact of online consumer reviews on a restaurant's revenue using a novel dataset combining reviews from the website Yelp.com and restaurant data from the Washington State Department of Revenue. Because Yelp prominently displays a restaurant's rounded average rating, I can identify the causal impact of Yelp ratings on demand with a regression discontinuity framework that exploits Yelp's rounding thresholds. I present three findings about the impact of consumer reviews on the restaurant industry: (1) a one-star increase in Yelp rating leads to a 9% increase in revenue, (2) this effect is driven by independent restaurants; ratings do not affect restaurants with chain affiliation, and (3) chain restaurants have declined in market share as Yelp penetration has increased. This suggests that online consumer reviews substitute for more traditional forms of reputation.;Chapter two explores the role of the US News College Rankings (USNWR) in college choice. When rankings are published next to each college in USNWR, a one-rank improvement leads to a 0.9 percentage point increase in the number of applications to that college. However, the response to the information contained in rankings depends on the way in which it is presented. Rankings have no effect on application decisions when colleges are listed alphabetically, even though students are provided with the underlying information. This provides insights into the way that consumers use information.;Chapter three focuses on the production of expert reviews, using book review data from the review aggregator Metacritic.com. In this chapter, I present two main findings about the determinants of expert reviews in the book review industry. First, expert reviews are horizontally differentiated across media outlets. Non-fiction books set in the United States are 15% less likely to be reviewed by media outlets in Canada, Great Britain, and Australia than they are by media outlets in the United States. Second, an author's connections are a key determinant of whether a book gets reviewed, and the quality of the resulting review. When an author has worked for a media outlet, that outlet is 30% more likely to review the book than it otherwise would. The resulting review is 8% better (using the scoring system developed by Metacritic) than other reviews written for the same book. Reader perception of quality as measured by consumer reviews from Amazon.com determines the quality of a review, but not the likelihood of being reviewed.