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Informational opacity and honest certication

Author

Listed:
  • Martin Pollrich

    (Humboldt-Universitaet zu Berlin)

  • Lilo Wagner

    (Deutsches Institut für Wirtschaftsforschung)

Abstract

This paper studies the interaction of information disclosure and reputational concerns in certication markets. We argue that by revealing less precise information a certifier reduces the threat of capture. Opaque disclosure rules may reduce profits but also constrain feasible bribes. For large discount factors a certifier is unconstrained in the choice of a disclosure rule and full disclosure maximizes profits. For intermediate discount factors, only less precise, such as noisy, disclosure rules are implementable. Our results suggest that contrary to the common view, coarse disclosure may be socially desirable. A ban may provoke market failure especially in industries where certifier reputational rents are low. Creation Date: 2013-04-01

Suggested Citation

  • Martin Pollrich & Lilo Wagner, "undated". "Informational opacity and honest certication," BDPEMS Working Papers 2013001, Berlin School of Economics.
  • Handle: RePEc:bdp:wpaper:2013001
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    References listed on IDEAS

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    Cited by:

    1. Loerke, Petra & Niedermayer, Andreas, 2015. "Crises and Rating Agencies," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 521, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    2. Marta Allegra Ronchetti, 2018. "Preliminary credit ratings and contact disclosure," Discussion Papers 2018/02, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    3. Marta Allegra Ronchetti, 2015. "Credit Rating Agency, Preliminary Ratings and Contact Disclosure," Discussion Papers 2015/04, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    4. Martin Pollrich & Lilo Wagner, 2013. "Gütesiegel: zu detaillierte Angaben können die Funktionsfähigkeit der Zertifikate schmälern," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 80(19), pages 15-18.

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    More about this item

    Keywords

    Certification; Bribery; Reputation;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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