Certification and Market Transparency

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URL:	https://ub-madoc.bib.uni-mannheim.de/37276
URN:	urn:nbn:de:bsz:180-madoc-372764
Dokumenttyp:	Arbeitspapier
Erscheinungsjahr:	2014
Titel einer Zeitschrift oder einer Reihe:	Working Paper Series
Band/Volume:	14-26
Ort der Veröffentlichung:	Mannheim
Sprache der Veröffentlichung:	Englisch
Einrichtung:	Fakultät für Rechtswissenschaft und Volkswirtschaftslehre > VWL, Mikroökonomik (Stahl K.1988-2009, Em)
MADOC-Schriftenreihe:	Department of Economics > Working Paper Series
Fachgebiet:	330 Wirtschaft
Fachklassifikation:	JEL: D82 , G24 , L15,
Freie Schlagwörter (Englisch):	Market Transparency , Certification , Information and Product Quality , Asymmetric Information
Abstract:	We provide elementary insights into the effectiveness of certification to increase market transparency. In a market with opaque product quality, sellers use certification as a signaling device, while buyers use it as an inspection device. This difference alone implies that seller-certification yields more transparency and higher social welfare. Under buyer-certification profit maximizing certifiers further limit transparency, but because seller-certification yields larger profits, active regulation concerning the mode of certification is not needed. These findings are robust and widely applicable to, for instance, patents, automotive parts, and financial products.