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Strategic Certification and Provision of Quality

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  • Albano, Gian Luigi
  • Lizzeri, Alessandro

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.

Suggested Citation

  • Albano, Gian Luigi & Lizzeri, Alessandro, 2001. "Strategic Certification and Provision of Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 267-283, February.
  • Handle: RePEc:ier:iecrev:v:42:y:2001:i:1:p:267-83
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