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That's News to Me! Information Revelation in Professional Certification Markets

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  • Ginger Zhe Jin
  • Andrew Kato
  • John A. List

Abstract

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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12390.

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Date of creation: Jul 2006
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Publication status: published as 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, 01.
Handle: RePEc:nbr:nberwo:12390

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  1. John List & David Reiley, 2008. "Field experiments," Artefactual Field Experiments 00091, The Field Experiments Website.
  2. Cantor, Richard & Packer, Frank, 1997. "Differences of opinion and selection bias in the credit rating industry," Journal of Banking & Finance, Elsevier, vol. 21(10), pages 1395-1417, October.
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  23. Guerra, G.A., 2001. "Certification Disclosure And Informational Efficiency: A Case For Ordered Ranking Of Levels," Economics Series Working Papers 9964, University of Oxford, Department of Economics.
  24. Gerardo A. Guerra, 2001. "Certification Disclosure and Informational Efficiency: A Case for Ordered Ranking of Levels," Economics Series Working Papers 64, University of Oxford, Department of Economics.
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Cited by:
  1. Steven Levitt & John List, 2009. "Field experiments in economics: The past, the present, and the future," Artefactual Field Experiments 00079, The Field Experiments Website.
  2. Gary E. Bolton & Axel Ockenfels, 2008. "Does Laboratory Trading Mirror Behavior in Real World Markets? Fair Bargaining and Competitive Bidding on EBay," CESifo Working Paper Series 2241, CESifo Group Munich.
  3. John List, 2006. "The behavioralist meets the market: Measuring social preferences and reputation effects in actual transactions," Natural Field Experiments 00300, The Field Experiments Website.
  4. Shyam Sunder & Karim Jamal, 2006. "Regulation, Competition and Independence in a Certification Society: Financial Reports Vs. Baseball Cards," Yale School of Management Working Papers amz2578, Yale School of Management, revised 01 Jun 2007.
  5. Vandana Ramachandran & Siva Viswanathan & Sanjay Gosain, 2007. "The Impact of Online Information on the Purchase of Certified Used Cars," Working Papers 07-37, NET Institute.
  6. Tom Wilkening, 2009. "The Informational Properties of Institutions: An Experimental Study of Persistence in Markets with Certification," Department of Economics - Working Papers Series 1087, The University of Melbourne.
  7. Michael Richards, 2012. "Using the economics of certification to improve the safety and quality of male circumcision in developing countries," Applied Health Economics and Health Policy, Springer, vol. 10(2), pages 77-85, March.

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