Product Testing, Seller Disclosure and Certification
50 Pages Posted: 12 Nov 2016 Last revised: 26 Jul 2018
Date Written: July 1, 2018
We study product certification by a certifier basing her decisions on a mixture of information, some of which is voluntarily disclosed by the sellers, and some of which she can acquire first-hand by testing products. We determine the conditions under which products are in fact tested and show that when these conditions hold then access to cheaper and more accurate certifier tests can lower social welfare and certification quality, by crowding out information disclosed by the sellers. Regulators may therefore prefer to license certification to relatively inefficient certification agencies.
Keywords: Certification, Product Testing, Information Acquisition, Information Disclosure
JEL Classification: C72, D82, D83, G24, G28
Suggested Citation: Suggested Citation