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Sonderforschungsbereich 649: Ökonomisches Risiko, Humboldt-Universität Berlin >
SFB 649 Discussion Papers, HU Berlin >
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http://hdl.handle.net/10419/39306
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| Title: | | Two-sided certification: The market for rating agencies  |
| Authors: | | Fasten, Erik R. Hofmann, Dirk |
| Issue Date: | | 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 |
| Appears in Collections: | | SFB 649 Discussion Papers, HU Berlin
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