Informational Opacity and Honest Certification

Martin Pollrich and Lilo Wagner

No 1291, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper studies the interaction of information disclosure and reputational concerns in certification 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.

Keywords: Certification; bribery; reputation (search for similar items in EconPapers)
JEL-codes: D82 L11 L14 L15 (search for similar items in EconPapers)
Pages: 36 p.
Date: 2013
New Economics Papers: this item is included in nep-cta
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Citations: View citations in EconPapers (2)

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https://www.diw.de/documents/publikationen/73/diw_01.c.419361.de/dp1291.pdf (application/pdf)

Related works:
Working Paper: Informational opacity and honest certification (2014)
Working Paper: Informational opacity and honest certication
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Persistent link: https://EconPapers.repec.org/RePEc:diw:diwwpp:dp1291

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