Using sportscard grading as an example, we employ field experiments to investigate empirically the informational role of professional certifiers. In the past 20 years, professional grading of sportscards has evolved in a way that provides a unique opportunity to measure the information provision of a monopolist certifier and that of subsequent entrants. Empirical results suggest three patterns: the grading certification provided by the first professional certifier offers new information to inexperienced traders but adds little information to experienced dealers. This implies that the certification may reduce the information asymmetry between informed and uninformed parties. Second, compared with the incumbent, new entrants adopt more precise signals and use finer grading cutoffs to differentiate from the incumbent. Third, our measured differentiated grading cutoffs map consistently into prevailing market prices, suggesting that the market recognizes differences across multiple grading criteria.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
12390.
Length: Date of creation: Jul 2006 Date of revision: Handle: RePEc:nbr:nberwo:12390
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Find related papers by JEL classification: D8 - Microeconomics - - Information, Knowledge, and Uncertainty C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
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