Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/39306
Authors: 
Fasten, Erik R.
Hofmann, Dirk
Year of Publication: 
2010
Series/Report no.: 
SFB 649 discussion paper 2010,007
Abstract: 
Certifiers contribute to the sound functioning of markets by reducing asymmetric information. They, however, have been heavily criticized during the 2008-09 financial crisis. This paper investigates on which side of the market a monopolistic profit-maximizing certifier offers his service. If the seller demands a rating, the certifier announces the product quality publicly, whereas if the buyer requests a rating it remains his private information. The model shows that the certifier offers his service to sellers and buyers to maximize his own profit with a higher share from the sellers. Overall, certifiers increase welfare in specific markets. Revenue shifts due to the financial crisis are also explained.
Subjects: 
Certification
Rating Agencies
Asymmetric Information
Financial Markets
JEL: 
G14
G24
L15
D82
Document Type: 
Working Paper

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