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Certification Design With Common Values

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  • Andreas Asseyer
  • Ran Weksler

Abstract

This paper studies certification design and its implications for information disclosure. Our model features a profit‐maximizing certifier and the seller of a good of unknown quality. We allow for common values as the seller's opportunity cost may depend on the quality of the good. We compare certifier‐optimal with transparency‐maximizing certification design. Certifier‐optimal certification design implements the evidence structure of Dye (1985)—a fraction of sellers acquire information while the remaining sellers are uninformed—and results in partial disclosure to the market. A transparency‐maximizing regulator prefers a less precise signal, which conveys more information to the market through a higher rate of certification and unraveling (Grossman (1981), Milgrom (1981)) at the disclosure stage.

Suggested Citation

  • Andreas Asseyer & Ran Weksler, 2024. "Certification Design With Common Values," Econometrica, Econometric Society, vol. 92(3), pages 651-686, May.
    • Handle: RePEc:wly:emetrp:v:92:y:2024:i:3:p:651-686
    DOI: 10.3982/ECTA21653
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    References listed on IDEAS

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    Cited by:

    1. Sebastian Schweighofer-Kodritsch & Roland Strausz, 2025. "Principled Mechanism Design with Evidence," CESifo Working Paper Series 11794, CESifo.

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