Certification and market transparency

Arbeitspapier

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.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB 649 Discussion Paper ; No. 2014-041

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Information and Product Quality; Standardization and Compatibility
• Subject: Market Transparency ; Certification ; Information and Product Quality ; Asymmetric Information

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Stahl, Konrad ; Strausz, Roland
• Event: Veröffentlichung
• (who): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (where): Berlin
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/103806