Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129579
Authors: 
Stahl, Konrad
Strausz, Roland
Year of Publication: 
2014
Series/Report no.: 
Working Paper Series, Department of Economics, University of Mannheim 14-26
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
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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