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Strategic Certification and Provision of Quality

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Author Info
Albano, Gian Luigi
Lizzeri, Alessandro

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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.

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Publisher Info
Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 42 (2001)
Issue (Month): 1 (February)
Pages: 267-83
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Handle: RePEc:ier:iecrev:v:42:y:2001:i:1:p:267-83

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  3. Marcus Alexander & Matthew C. Harding, 2003. "Self-regulation and the Certification of the European Information Economy The Case of e-Healthcare Information Provision," Economics Series Working Papers 154, University of Oxford, Department of Economics. [Downloadable!]
  4. Takalo , Tuomas & Tanayama , Tanja, 2008. "Adverse selection and financing of innovation: is there a need for R&D subsidies?," Research Discussion Papers 19/2008, Bank of Finland. [Downloadable!]
  5. Dimitri, Carolyn & Lichtenberg, Erik, 2002. "Quality Inspection, Adverse Selection And Trade In Perishable Commodities," Working Papers 28579, University of Maryland, Department of Agricultural and Resource Economics. [Downloadable!]
  6. Erik Durbin, 2000. "McDonald's or the Michelin Guide? Revealing Quality Through Private-Sector Certification," Econometric Society World Congress 2000 Contributed Papers 1097, Econometric Society. [Downloadable!]
  7. Adriani, Fabrizio & Deidda, Luca & Sonderegger, Silvia, 2009. "The Role of Financial Intermediaries in Securities Issues: A Theoretical Analysis," MPRA Paper 16112, University Library of Munich, Germany. [Downloadable!]
  8. Yiquan Gu, 2008. "Imperfect Certification," Ruhr Economic Papers 0078, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
  9. Güzin Bayar, 2005. "The role of intermediaries in corruption," Public Choice, Springer, vol. 122(3), pages 277-298, March. [Downloadable!] (restricted)
  10. Gill, David & Sgroi, Daniel, 2008. "The Optimal Choice of Pre-launch Reviewer : How Best to Transmit Information using Tests and Conditional Pricing," The Warwick Economics Research Paper Series (TWERPS) 877, University of Warwick, Department of Economics. [Downloadable!]
  11. David Gill & Daniel Sgroi, 2005. "Sequential Decisions with Tests," Economics Series Working Papers 242, University of Oxford, Department of Economics. [Downloadable!]
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  12. Langinier, Corinne & Babcock, Bruce, 2005. "Producer's choice of certification," 2005 Annual meeting, July 24-27, Providence, RI 19510, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  13. Omer Moav & Zvika Neeman, 2004. "Inspection in Markets for Experience Goods," Discussion Paper Series dp349, Center for Rationality and Interactive Decision Theory, Hebrew University, Jerusalem. [Downloadable!]
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