Strategic certification and provision of quality

Gian Luigi Albano, Alessandro Lizzeri

    Research output: Contribution to journalArticle

    Abstract

    We study the effect of the presence of a certification intermediary in an environment where information asymmetries are particularly severe. The intermediary improves the information that buyers have about quality. This in turn increases the incentives that the seller has to provide high-quality goods. Efficiency is increased by the presence of the intermediary, but quality is underprovided in equilibrium relative to full information. The intermediary can implement the optimal policy in many ways. The amount of information revealed ranges from full disclosure to partial, noisy disclosure.

    Original languageEnglish (US)
    Pages (from-to)267-283
    Number of pages17
    JournalInternational Economic Review
    Volume42
    Issue number1
    DOIs
    StatePublished - Feb 2001

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    ASJC Scopus subject areas

    • Economics and Econometrics

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