Testing, Disclosure and Approval

Abstract

Certifiers often base their decisions on a mixture of information, some of which is voluntarily disclosed by applicants, and some of which they acquire by way of tests or otherwise. We study the interplay between the information acquisition of certifiers and the information disclosure of applicants. We show that the inability of a certifier to commit to the amount of information to be acquired can result in a reduction of information disclosed. Among other consequences, given the choice between two information acquisition technologies, the certifier may prefer to commit to the inferior technology, in the sense of being either more expensive or less accurate.

Keywords: Information Acquisition; Testing; Disclosure; Certification

JEL Classification: C72, D82, D83, G24, G28