Internet Intermediaries' Editorial Content Quality
Information intermediaries deliver information about a supplier's product. They are paid by those same suppliers they certify. This introduces conflicts of interests as the intermediaries want to retain customers by delivering truthful information about suppliers, while suppliers would want the intermediary to provide them with more customers than their quality would otherwise entitle them to. The paper compares two options for information intermediaries: either propose a menu of contracts to the suppliers so that they reveal their type, or find out by themselves the type of the supplier. In the first case, a rent must be left to induce type revelation, in the other, the intermediary must incur a cost to determine the type of the supplier. The paper shows that competition leads to a more frequent use of direct revelation mechanisms at the expense of independent research by the intermediary. The paper contributes to the literature on certification intermediaries in two sided markets by introducing a choice between relying on soft information or acquiring hard information about the side of the market to be certified, and by studying the influence of competition on contract choices in such an extended setting.
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- Smith, Michael D & Brynjolfsson, Erik, 2001.
"Consumer Decision-Making at an Internet Shopbot: Brand Still Matters,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 49(4), pages 541-558, December.
- Michael D. Smith & Erik Brynjolfsson, 2001. "Consumer Decision-making at an Internet Shopbot: Brand Still Matters," NBER Chapters, in: E-commerce, pages 541-558 National Bureau of Economic Research, Inc.
- Baye, Michael R. & Morgan, John, 2000. "A simple model of advertising and subscription fees," Economics Letters, Elsevier, vol. 69(3), pages 345-351, December.
- Strausz, Roland, 2004.
"Honest Certification and the Threat of Capture,"
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
25, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Simon P. Anderson & Stephen Coate, 2000. "Market Provision of Public Goods: The Case of Broadcasting," NBER Working Papers 7513, National Bureau of Economic Research, Inc.
- Tano Santos & José A. Scheinkman, 2000.
"Competition Among Exchanges,"
CRSP working papers
514, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Guerra, G.A., 2001. "Certification Disclosure And Informational Efficiency: A Case For Ordered Ranking Of Levels," Economics Series Working Papers 9964, University of Oxford, Department of Economics.
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