Information disclosure about seller quality is common in many markets and is presumed to benefit consumers by allowing them to identify high quality firms. However, in some service industries where sellers are capacity-constrained, quality information disclosure may reallocate consumers in urgent needs to low quality sellers because high quality sellers can quickly reach their capacity with scheduled consumers. In this project, I consider this reallocation problem as well as seller quality improvement induced by information disclosure and examine whether quality information disclosure is beneficial to consumers.
Consumer reallocation induced by quality information disclosure is a common problem in many service industries such as healthcare services, dining services, and repair services. But this problem has been little documented. This project contributes to the existing literature by finding empirical evidence on consumer reallocation and showing why quality information disclosure about capacity-constrained sellers can cause an undesirable effect. In addition, this project tries to clearly distinguish consumer reallocation from alternative explanations such as active seller rationing or seller gaming behavior.