Imperfect Competition in Certification Markets

23 Pages Posted: 21 Jul 1998

Date Written: April 1998

Abstract

This paper offers a theoretical analysis of imperfect competition in certification markets. Firms that intend to engage in a regulated activity must produce third-party certification of compliance with prescribed regulations and standards. The certification service is provided by independent certifiers competing a la Cournot. We show that the interaction between certifiers and firms results in a market equilibrium that can be illuminated by the techniques of standard oligopoly theory. When certifiers' liability is not too low, the certification fee is determined by the degree of concentration of the certification market. Due to the peculiarity of this market, a lower concentration is not always socially desirable.

JEL Classification: L59, K29, M49

Suggested Citation

Franzoni, Luigi Alberto, Imperfect Competition in Certification Markets (April 1998). Available at SSRN: https://ssrn.com/abstract=94052 or http://dx.doi.org/10.2139/ssrn.94052

Luigi Alberto Franzoni (Contact Author)

University of Bologna ( email )

P.zza Scaravilli 2
Bologna, 40124
Italy
0512098488 (Phone)
+39-051-221968 (Fax)

HOME PAGE: https://www.unibo.it/sitoweb/luigi.franzoni/en

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