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| Author: | Albano, G. L. Lizzeri, A. |
| Title: | Strategic Certification and Provision of Quality |
| Journal: | International Economic Review
2001 : FEB, VOL. 42:1, p. 267-283 |
| Index terms: | STRATEGY CERTIFICATION QUALITY |
| Language: | eng |
| Abstract: | The authors study the effect of the presence of a certification intermediary in an environment where information asymmetries are particularly severe. The intermediary improves the information that buyers have about quality. This in turn increases the incentives that the seller has to provide high-quality goods. Efficiency is increased by the presence of the intermediary, but quality is underprovided in equilibrium relative to full information. The intermediary can implement the optimal policy in many ways. The amount of information revealed ranges from full disclosure to partial, noisy disclosure. It is shown that an environment with pure adverse selection, where the distribution of quality available for sale is exogenous, the intermediary could extract all the information rents with a constant fee. |
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