Certification and Market Transparency

Stahl, Konrad und Strausz, Roland (2017): Certification and Market Transparency. Collaborative Research Center Transregio 190, Discussion Paper No. 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.

• Dokumententyp: Paper
• Keywords: Market transparency; certification; information and product quality; asymmetric information
• Fakultät: Volkswirtschaft > Collaborative Research Center Transregio "Rationality and Competition"
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: D82, G24, L15
• Sprache: Englisch