Could Bad Certifiers Certify Best?
29 Pages Posted: 12 Nov 2016 Last revised: 15 Jul 2017
Date Written: January 1, 2017
We study product certification in settings where the certifier maximizes social welfare and bases his decisions on a mixture of information, some of which is voluntarily disclosed by the sellers, and some of which he acquires first hand by testing products. We show that unless the certifier is able to pre-commit to a testing strategy, then having better access to information may lead to worse certification quality, by crowding out information disclosed by the sellers. Policy implications are discussed.
Keywords: Certification, Product Testing, Information Acquisition, Information Disclosure
JEL Classification: C72, D82, D83, G24, G28
Suggested Citation: Suggested Citation