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American Economic Journal: Microeconomics: Vol. 1 No. 1 (February 2009)

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Reputational Incentives for Restaurant Hygiene

Article Citation

Jin, Ginger Zhe, and Phillip Leslie. 2009. "Reputational Incentives for Restaurant Hygiene." American Economic Journal: Microeconomics, 1(1): 237-67.

DOI: 10.1257/mic.1.1.237

Abstract

How can consumers be assured that firms will endeavor to provide good quality when quality is unobservable prior to purchase? We test the hypothesis that reputational incentives are effective at causing restaurants to maintain good hygiene quality. We find that chain affiliation provides reputational incentives and franchised units tend to free-ride on chain reputation. We also show that regional variation in the degree of repeat customers affects the strength of reputational incentives for good hygiene at both chain and nonchain restaurants. Despite these incentives, a policy intervention in the form of posted hygiene grade cards causes significant improvements in restaurant hygiene. (JEL I18, I19, L14, L83).

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Authors

Jin, Ginger Zhe (U MD)
Leslie, Phillip (Stanford U)

JEL Classifications

I18: Health: Government Policy; Regulation; Public Health
I19: Health: Other
L14: Transactional Relationships; Contracts and Reputation; Networks
L83: Sports; Gambling; Recreation; Tourism

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