Information Costs and Snowfall Data

Lynne Kiesling

Here’s a paper that befits the snowy month we’ve had in the U.S. … Jonathan Zinman and Eric Zitzewitz at Dartmouth find that ski resorts over-report snowfall, and that the proliferation of iPhones has led to more consumer information on accurate snowfall and ski conditions. The paper abstract:

Casual empiricism suggests that deceptive advertising is prevalent, and several classes of theories explore its causes and consequences. We provide some unusually sharp empirical evidence on the extent, mechanics, and dynamics of deceptive advertising. Ski resorts self-report 23 percent more snowfall on weekends; there is no such weekend effect in government precipitation data. Resorts that plausibly reap greater benefits from exaggerating do it more. We find little evidence that competition restrains or encourages exaggeration. Near the end of our sample period, we observe a shock to the information environment: a new iPhone application feature makes it easier for skiers to comment on resort ski conditions in real time. Exaggeration falls sharply, especially at resorts where iPhones can get reception.

This kind of empirical economic research is particularly valuable, because it highlights the role that technology can play in enabling the aggregation of dispersed information, which better enables reputation mechanisms to discipline otherwise deceptive behavior. In many contexts this combination of technology and diffuse information feeding into a reputation mechanism provides more effective regulation than some form of centralized, government regulation. Imagine, for example, a law requiring ski resorts to report accurate conditions, with an entire agency established to monitor and enforce their compliance. Likely to be much more expensive, and less effective, than the simple threat of losing weekend business!

Hat tip to Salon article on the research.

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