Honest Certification and the Threat of Capture

Roland Strausz ()

Departmental Working Papers from Freie Universität, Fachbereich Wirtschaftswissenschaften

Abstract: This paper studies problems of capture in certification markets. It derives conditions under which reputation enables certifiers to resist capture. Moreover, it identifies a general principle of reputation models that favors concentration. This explains certifiers as efficient market institutions that sell reputation as a service to other firms. The analysis yields the following insights: 1) A demand for external certification exists, despite being costly and susceptibility to capture. 2) Low discount factors require a price of certification that exceeds the static monopoly price. 3) Price competition tends to a monopolization of certification markets. 4) Honest certification exhibits economies of scale and constitutes a natural monopoly.

Keywords: certification; collusion; bribery; reputation; natural monopoly (search for similar items in EconPapers)
JEL-codes: L15 D82 L11 (search for similar items in EconPapers)
View list of references View citations in EconPapers

Downloads: (external link)
http://userpage.fu-berlin.de/%7Elsbester/papers/cert5.pdf (application/pdf)

Related works:
Working Paper: Honest Certification and the Threat of Capture (2004)
Journal Article: Honest certification and the threat of capture (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:bef:lsbest:018

Access Statistics for this paper

More papers in Departmental Working Papers from Freie Universität, Fachbereich Wirtschaftswissenschaften
Contact information at EDIRC.
Series data maintained by XXX ().