Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/149662
Authors: 
Stahl, Konrad
Strausz, Roland
Year of Publication: 
2017
Series/Report no.: 
Discussion Paper 3
Abstract: 
In markets with quality unobservable to buyers, third-party certification is often the only instrument to increase transparency. While both sellers and buyers have a demand for certification, its role differs fundamentally: sellers use it for signaling, buyers use it for inspection. Seller induced certification leads to more transparency, because it is informative - even if unused. By contrast, buyer induced certification incentivizes certifiers to limit transparency, as this raises demand for inspection. Whenever transparency is socially beneficial, seller certification is preferable. It also yields certifiers larger profits, so that regulating the mode of certification is redundant.
Subjects: 
Market Transparency
Certification
Information and Product Quality
Asymmetric Information
JEL: 
D82
G24
L15
Document Type: 
Working Paper

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