Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103806
Authors: 
Stahl, Konrad
Strausz, Roland
Year of Publication: 
2014
Series/Report no.: 
SFB 649 Discussion Paper 2014-041
Abstract: 
We provide elementary insights into the effectiveness of certification to increase market transparency. In a market with opaque product quality, sellers use certification as a signaling device, while buyers use it as an inspection device. This difference alone implies that seller-certification yields more transparency and higher social welfare. Under buyer-certification profit maximizing certifiers further limit transparency, but because seller-certification yields larger profits, active regulation concerning the mode of certification is not needed. These findings are robust and widely applicable to, for instance, patents, automotive parts, and financial products.
Subjects: 
Market Transparency
Certification
Information and Product Quality
Asymmetric Information
JEL: 
D82
G24
L15
Document Type: 
Working Paper

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