Quality Disclosure and Certification: Theory and Practice
AbstractThis essay reviews the theoretical and empirical literature on quality disclosure and certification. After comparing quality disclosure with other quality assurance mechanisms and describing a brief history of quality disclosure, we address two sets of theoretical issues. First, why don't sellers voluntarily disclose through a process of "unraveling" and, given the lack of unraveling, is it desirable to mandate seller disclosure? Second, when we rely on certifiers to act as the intermediary of quality disclosure, do certifiers necessarily report unbiased and accurate information? We further review empirical evidence on these issues, with a particular focus on healthcare, education, and finance. The empirical review covers quality measurement, the effect of third-party disclosure on consumer choice and seller behavior, as well as the economics of certifiers. (JEL D18, K32, L15, M31)
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Bibliographic InfoArticle provided by American Economic Association in its journal Journal of Economic Literature.
Volume (Year): 48 (2010)
Issue (Month): 4 (December)
Other versions of this item:
- David Dranove & Ginger Zhe Jin, 2010. "Quality Disclosure and Certification: Theory and Practice," NBER Working Papers 15644, National Bureau of Economic Research, Inc.
- D18 - Microeconomics - - Household Behavior - - - Consumer Protection
- K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
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