Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94087
Authors: 
Stahl, Konrad
Strausz, Roland
Year of Publication: 
2010
Series/Report no.: 
SFB/TR 15 Discussion Paper 323
Abstract: 
Who does, and who should initiate costly certification by a third party under asymmetric quality information, the buyer or the seller? Our answer '€” the seller '€” follows from a non-trivial analysis revealing a clear intuition. Buyer-induced certification acts as an inspection device, whence seller-induced certification acts as a signalling device. Seller-induced certification maximizes the certifier's profit and social welfare. This suggests the general principle that certification is, and should be induced by the better informed party. The results are reflected in a case study from the automotive industry, but apply also to other markets - in particular the financial market.
Subjects: 
asymmetric information
certi?cation
information acquisition
inspection
lemons
middlemen
signaling
JEL: 
D40
D82
L14
L15
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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