Who should pay for certification?

Arbeitspapier

Who does, and who should initiate costly certification by a third party under asymmetric quality information, the buyer or the seller? Our answer - the seller - follows from a nontrivial analysis revealing a clear intuition. Buyer-induced certification acts as an inspection device, seller-induced certification as a signalling device. Seller-induced certification maximizes the certifier's profit and social welfare. This suggests the general principle that certification is, and should be induced by the better informed party. The results are reflected in a case study from the automotive industry, but apply also to other markets - in particular the financial market.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 11-054

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: General ; Asymmetric and Private Information; Mechanism Design ; Transactional Relationships; Contracts and Reputation; Networks ; Information and Product Quality; Standardization and Compatibility
• Subject: Asymmetric information ; certification ; information acquisition ; inspection ; lemons ; middlemen ; signaling ; Normung ; Produktqualität ; Asymmetrische Information ; Kunden ; Kosten ; Signalling ; Kraftfahrzeugindustrie

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Stahl, Konrad ; Strausz, Roland
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/48873
• Last update: 10.03.2025, 11:41 AM CET