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Quality Disclosure and Certification: Theory and Practice

  • David Dranove
  • Ginger Zhe Jin

This essay reviews the theoretical and empirical literature on quality disclosure and certification. After comparing quality disclosure with other quality assurance mechanisms and describing a brief history of quality disclosure, we address three key theoretical issues: (i) Why don't sellers voluntarily disclose through a process of "unraveling?" (ii) When should government mandate disclosure? and (iii) Do certifiers necessarily report unbiased and accurate information? We further review empirical evidence on these issues, with a particular focus on healthcare, education, and finance. The empirical review covers quality measurement, the effect of third party disclosure on consumer choice and seller behavior, as well as the economics of certifiers.

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File URL: http://www.nber.org/papers/w15644.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15644.

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Date of creation: Jan 2010
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Publication status: published as David Dranove & Ginger Zhe Jin, 2010. "Quality Disclosure and Certification: Theory and Practice," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 935-63, December.
Handle: RePEc:nbr:nberwo:15644
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