Salience in Quality Disclosure: Evidence from the U.S. News College Rankings

29 Pages Posted: 13 Sep 2011

See all articles by Michael Luca

Michael Luca

Harvard University - Business School (HBS)

Jonathan Smith

Advocacy and Policy Center - College Board

Date Written: September 13, 2011

Abstract

How do rankings affect demand? This paper investigates the impact of college rankings, and the visibility of those rankings, on students’ application decisions. Using natural experiments from U.S. News and World Report College Rankings, we present two main findings. First, we identify a causal impact of rankings on application decisions. When explicit rankings of colleges are published in U.S. News, a one-rank improvement leads to a 1-percentage-point increase in the number of applications to that college. Second, we show that the response to the information represented in rankings depends on the way in which that information is presented. Rankings have no effect on application decisions when colleges are listed alphabetically, even when readers are provided data on college quality and the methodology used to calculate rankings. This finding provides evidence that the salience of information is a central determinant of a firm’s demand function, even for purchases as large as college attendance.

Suggested Citation

Luca, Michael and Smith, Jonathan, Salience in Quality Disclosure: Evidence from the U.S. News College Rankings (September 13, 2011). Harvard Business School NOM Unit Working Paper No. 12-014, Available at SSRN: https://ssrn.com/abstract=1926750 or http://dx.doi.org/10.2139/ssrn.1926750

Michael Luca (Contact Author)

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Boston, MA 02163
United States

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=602417

Jonathan Smith

Advocacy and Policy Center - College Board ( email )

GA
United States

HOME PAGE: http://https://sites.google.com/site/jonathansmithphd/

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