The intuitive nature of signaling theory in
part helps explain its pervasiveness.
The usefulness of a signal depends on the extent to which the signal
corresponds with the sought after quality of the signaler. Herein, we examine a
singular quality signal from the beer industry-winning a coveted Great American
Beer Festival (GABF) medal. To provide an assessment of the quantitative impact
of winning a GABF medal, this paper exploits a unique and expansive unbalanced
panel of time-series, cross-section data from 1989-2012. Firm specific
production changes are merged with the GABF medal winner database. Results from
a two-way fixed-effects specification finds no significant relationship between
winning a GABF medal or medals and changes in a brewery's output.
Interestingly, it appears that the GABF quality signal applies more to the
brewer than the brewery.
JEL classification numbers: D12, L81, M31.
Keywords: Quality signals, production, information asymmetry.