Essays on Information Disclosure, Opportunistic Strategies, and Government Regulation
Open AccessThe opportunistic behaviors of agents facing mandatory regulation are well documented in industrial organization literature. This dissertation explores this behavior in restaurants which are subject to hygiene inspections in the United States.The first chapter explores New York City's 2010 mandatory information disclosure policy of posting hygiene quality grade cards on restaurant windows. It finds that the dual inspection process (initial inspection and re-inspection) has been exploited by restaurants: after getting an A card in the re-inspection phase restaurants frequently revert back to their previous bad hygiene conditions. As a result, there is no significant overall hygiene improvement in NYC. Furthermore, the paper uses an ordered logit model to find that a reduction in asymmetric information for the consumer (the introduction of letter grades) narrows the difference between chain and non-chain restaurant hygiene scores.The second chapter explores the role of repetition in government regulation. Using restaurant inspection data in King County, WA from 2006 to 2015, it finds if an unexpected inspector is acquainted to the restaurant he would report 10% more critical violations than a repeat inspector. Likewise, an unacquainted inspector would detect 28% more than a repeat inspector. Generally, the first arrival of a different and unexpected inspector would uncover more violations, with a higher (worse) hygiene score than a repeat inspector. The acquainted inspector effect demonstrates that objectivity in government regulation could be undermined by irrelevant factors.The third chapter examines the 2014 policy modification to hygiene inspections in New York City. It uses and compares three models to determine the effect of this policy change. This paper finds that the violation fine reduction in this policy modification is not monetarily large enough to prevent more restaurants from behaving opportunistically. As a result, this modification does not fix the flaws in the letter grade policy.
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