Quality Disclosure and Certification: Theory and Practice

57 Pages Posted: 18 Jan 2010 Last revised: 2 Feb 2010

See all articles by David Dranove

David Dranove

Northwestern University - Kellogg School of Management

Ginger Zhe Jin

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 2010

Abstract

This essay reviews the theoretical and empirical literature on quality disclosure and certification. After comparing quality disclosure with other quality assurance mechanisms and describing a brief history of quality disclosure, we address three key theoretical issues: (i) Why don't sellers voluntarily disclose through a process of "unraveling?" (ii) When should government mandate disclosure? and (iii) Do certifiers necessarily report unbiased and accurate information? We further review empirical evidence on these issues, with a particular focus on healthcare, education, and finance. The empirical review covers quality measurement, the effect of third party disclosure on consumer choice and seller behavior, as well as the economics of certifiers.

Suggested Citation

Dranove, David and Jin, Ginger Zhe, Quality Disclosure and Certification: Theory and Practice (January 2010). NBER Working Paper No. w15644. Available at SSRN: https://ssrn.com/abstract=1537763

David Dranove (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8682 (Phone)
847-467-1777 (Fax)

Ginger Zhe Jin

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3484 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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