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Certification Disclosure And Informational Efficiency: A Case For Ordered Ranking Of Levels

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Author Info

  • Guerra, G.A.

Abstract

This paper shows that a monopolistic certifying party can have incentives to disclose revealing information about the agent he is certifying. Using a three-person game-theoretic model and allowing certificate users (buyers) to have noisy estimates of the quality level of the agent being certified (seller), a disclosure in the form of ordered ranking of levels is predicted. This contrasts with previous results in certification theory stating that monopolistic certifiers disclose a minimum amount of information (with no informational value) about the party being certified, in order to extract all informational rents from the market. The predicted disclosure is consistent with real life observations of certification disclosure as found in debt rating (notches) and hotels listings (using a discrete system of stars).

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 9964.

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Length: 34 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:oxf:wpaper:9964

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Related research

Keywords: MONOPOLIES ; MARKET ; INFORMATION;

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Cited by:
  1. Ginger Zhe Jin & Andrew Kato & John A. List, 2006. "That's News to Me! Information Revelation in Professional Certification Markets," NBER Working Papers 12390, National Bureau of Economic Research, Inc.
  2. 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.
  3. Gaudeul, Alexandre & Jullien, Bruno, 2005. "E-Commerce, Two-Sided Markets and Info-Mediation," IDEI Working Papers 380, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. Alexandre Gaudeul, 2004. "Internet Intermediaries' Editorial Content Quality," Industrial Organization 0409005, EconWPA.

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