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The irrelevance of fee structures for certification

Author

Listed:
  • Martin Pollrich
  • Roland Strausz

Abstract

In models of certification possible restrictions on the nature of the fee structures are commonly analyzed. We show that they are irrelevant for the certifier’s ability to maximize profits and trade efficiency. Our results establish that certification schemes involve two substitutable dimensions—the fee structure and the disclosure rule. In the context of a canonical unit good certification setup, these dimensions act as perfect substitutes for achieving trade efficiency and (monotone) distributions of rents; adjustments in the disclosure dimension can fully mitigate restrictions in the fee dimension, but these changes do affect market transparency.

Suggested Citation

  • Martin Pollrich & Roland Strausz, 2023. "The irrelevance of fee structures for certification," Berlin School of Economics Discussion Papers 0017, Berlin School of Economics.
    • Handle: RePEc:bdp:dpaper:0017
    DOI: 10.48462/opus4-4972
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    References listed on IDEAS

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    1. Mathis, Jérôme & McAndrews, James & Rochet, Jean-Charles, 2009. "Rating the raters: Are reputation concerns powerful enough to discipline rating agencies?," Journal of Monetary Economics, Elsevier, vol. 56(5), pages 657-674, July.
    2. Navin Kartik & Weijie Zhong, 2023. "Lemonade from Lemons: Information Design and Adverse Selection," Papers 2305.02994, arXiv.org, revised Sep 2025.
    3. Ozerturk, Saltuk, 2014. "Upfront versus rating contingent fees: Implications for rating quality," Finance Research Letters, Elsevier, vol. 11(2), pages 91-103.
    4. Skreta, Vasiliki & Veldkamp, Laura, 2009. "Ratings shopping and asset complexity: A theory of ratings inflation," Journal of Monetary Economics, Elsevier, vol. 56(5), pages 678-695, July.
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    2. S. Nageeb Ali & Andreas Kleiner & Kun Zhang, 2024. "From Design to Disclosure," Papers 2411.03608, arXiv.org, revised Jan 2026.

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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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