Role of Signals In Consumers’ Economic Valuation of Restaurant Choices

While businesses provide “signals” related to products/services to alleviate information asymmetry and facilitate consumers’ economic valuation of their offerings, it is not always clear which of these signals is more effective. This study investigated the comparative effectiveness of signals on influencing consumers’ choices and their willingness to pay (WTP) for a restaurant meal. Results of an online stated choice experiment (N =328) suggest that local independent ownership, local sourcing, and food quality significantly influenced individuals’ choices and increased WTP for a meal. Higher food quality signal in a local and independently owned restaurant was associated with a 40% WTP price premium than in a national chain restaurant. Findings of this study contribute to our understanding of signaling factors’ relative influence on an individual’s decision. The study also offers management implications for restaurant owners on how to effectively align signals to target potential consumers.