Two-sided reputation in certification markets

Matthieu Bouvard and Raphaël Levy

No 339, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: In a market where sellers solicit certication to overcome adverse selection, we show that the profit of a monopolistic certifier is hump-shaped in his 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 another certifier impacts reputational incentives: when sellers can only solicit one certifier, competition plays a disciplining role and the region where reputation is bad shrinks. Conversely, this region expands when sellers can hold multiple certifications.

Keywords: reputation; certification; multihoming (search for similar items in EconPapers)
JEL-codes: D82 D83 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Two-Sided Reputation in Certification Markets (2018)
Working Paper: Two-sided reputation in certification markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:339

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