Informational opacity and honest certication

Martin Pollrich and Lilo Wagner ()
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Lilo Wagner: Deutsches Institut für Wirtschaftsforschung

No 2013001, BDPEMS Working Papers from Berlin School of Economics

Abstract: This paper studies the interaction of information disclosure and reputational concerns in certication markets. We argue that by revealing less precise information a certifier reduces the threat of capture. Opaque disclosure rules may reduce profits but also constrain feasible bribes. For large discount factors a certifier is unconstrained in the choice of a disclosure rule and full disclosure maximizes profits. For intermediate discount factors, only less precise, such as noisy, disclosure rules are implementable. Our results suggest that contrary to the common view, coarse disclosure may be socially desirable. A ban may provoke market failure especially in industries where certifier reputational rents are low. Creation Date: 2013-04-01

Keywords: Certification; Bribery; Reputation (search for similar items in EconPapers)
JEL-codes: D82 L11 L14 L15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Informational Opacity and Honest Certification (2013)
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