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http://ssrn.com/abstract=2163760
 
 

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Does Information Really 'Unravel'? Understanding Factors That Motivate Sellers to Seek Third-Party Certifications in an Online Labor Market


Paulo Goes


University of Arizona - Department of Management Information Systems

Mingfeng Lin


University of Arizona - Eller College of Management

November 1, 2012

NET Institute Working Paper No. 12-02

Abstract:     
Despite the abundance of studies on consequences of certification, there is little empirical research on what motivates sellers to attempt certifications in the first place. One of the most intriguing theoretical predictions is the “information unraveling” proposition, which predicts a “domino- effect” in sellers’ certification-seeking behavior when a certification opportunity arises. To test this proposition, and to further identify factors that motivate sellers to seek certifications, we exploit two unique natural experiments and detailed transaction data from a large online labor market. The first natural experiment was the introduction of certifications into the market, with a fee; and the second occurred when certification exams were made free. We derive and test hypotheses on factors that motivate sellers to seek certifications, including word-of-mouth, repeat customers, cost of certification, and informational cascading. We also find that, contrary to theoretical predictions, certification status negatively impacts some sellers’ ability to obtain contracts. These findings have important managerial as well as academic implications.

Number of Pages in PDF File: 32

Keywords: third-party certification, quality disclosure, information asymmetry, signaling, information unraveling, cascading, online labor markets, online outsourcing

JEL Classification: L15, L86, J01

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Date posted: October 24, 2012 ; Last revised: December 3, 2012

Suggested Citation

Goes, Paulo and Lin, Mingfeng, Does Information Really 'Unravel'? Understanding Factors That Motivate Sellers to Seek Third-Party Certifications in an Online Labor Market (November 1, 2012). NET Institute Working Paper No. 12-02. Available at SSRN: http://ssrn.com/abstract=2163760 or http://dx.doi.org/10.2139/ssrn.2163760

Contact Information

Paulo Goes
University of Arizona - Department of Management Information Systems ( email )
AZ
United States
Mingfeng Lin (Contact Author)
University of Arizona - Eller College of Management ( email )
Tucson, AZ 85721
United States
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References:  32
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