Informational Opacity and Honest Certification
This paper studies the interaction of information disclosure and reputational concerns in certification 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.
|Date of creation:||2013|
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- Corinne Langinier & Bruce A. Babcock, 2006.
"Agricultural Production Clubs: Viability and Welfare Implications,"
Center for Agricultural and Rural Development (CARD) Publications
06-wp431, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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- Langinier, Corinne & Babcock, Bruce A., 2006. "Agricultural Production Clubs: Viability and Welfare Implications," Staff General Research Papers 12670, Iowa State University, Department of Economics.
- Antoine Faure-Grimaud & Eloïc Peyrache & Lucía Quesada, 2009.
"The ownership of ratings,"
RAND Journal of Economics,
RAND Corporation, vol. 40(2), pages 234-257.
- 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.
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