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Imperfect competition in certification markets

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  • L. A. Franzoni

Abstract

This paper offers a theoretical analysis of imperfect competition in certification markets. Firms that intend to engage in a regulated activity must produce third-party certification of compliance with prescribed regulations and standards. The certification service is provided by independent certifiers competing la Cournot. We show that the interaction between certifiers and firms results in a market equilibrium that can be illuminated by the techniques of standard oligopoly theory. When certifiers liability is not too low, the certify cation fee is determined by the degree of concentration of the certification market. Due to the peculiarity of this market, a lower concentration is not always socially desirable.

Suggested Citation

  • L. A. Franzoni, 1998. "Imperfect competition in certification markets," Working Papers 338, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:338
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    References listed on IDEAS

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    1. L. A. Franzoni, 1997. "Independent Auditors as Fiscal Gatekeepers," Working Papers 286, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. ALBANO, Gian Luigi & LIZZERI, Alessandro, 1997. "A monopolistic market for certification," LIDAM Discussion Papers CORE 1997037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Cited by:

    1. Ginger Zhe Jin & Andrew Kato & John A. List, 2010. "That’S News To Me! Information Revelation In Professional Certification Markets," Economic Inquiry, Western Economic Association International, vol. 48(1), pages 104-122, January.
    2. Marcus Alexander & Matthew C. Harding & Department of Economics & MIT, 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.
    3. Jan Myslivecek, 2008. "How to Price Imperfect Certification," CERGE-EI Working Papers wp364, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

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