Two-Sided Reputation in Certification Markets

Matthieu Bouvard () and Raphaël Levy
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Matthieu Bouvard: Desautels Faculty of Management, McGill University, Montreal, Quebec H3A 1G5, Canada

Management Science, 2018, vol. 64, issue 10, 4755-4774

Abstract: In a market where sellers solicit certification to overcome asymmetric information, we show that the profit of a monopolistic certifier can be hump-shaped in its reputation for accuracy: a higher accuracy attracts high-quality sellers but sometimes repels low-quality sellers. As a consequence, reputational concerns may induce the certifier to reduce information quality, thus depressing welfare. The entry of a second certifier impacts reputational incentives: when sellers only solicit one certifier, competition plays a disciplining role and the region where reputation is bad shrinks. Conversely, this region may expand when sellers hold multiple certifications.

Keywords: reputation; certification; credit rating agencies (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (13)

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https://doi.org/10.287/mnsc.2017.2742 (application/pdf)

Related works:
Working Paper: Two-sided reputation in certification markets (2013)
Working Paper: Two-sided reputation in certification markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:64:y:2018:i:10:p:4755-4774

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