Template-Type: ReDIF-Paper 1.0
Author-Name: Jacopo Bizzotto
Author-Name-First: Jacopo
Author-Name-Last: Bizzotto
Author-Workplace-Name: Oslo Business School - OsloMet
Author-Name: Bård Harstad
Author-Name-First: Bård
Author-Name-Last: Harstad
Author-Workplace-Name: University of Oslo - Department of Economics
Title: The Choice of Certifier in Endogenous Markets
Abstract: For markets to work, buyers must know when products are of high quality. This paper provides a theoretical framework for studying the consequences of the certifier's identity, the characteristics of the best certifier, and the identity of the equilibrium certifier. A certifier that cares about quality and externalities (such as an NGO) motivates firms to invest in their capacities to provide quality; a certifier concerned with the firms' profits (such as an industry association) motivates more firms to enter the market in the first place. The relative importance of externalities, investments, and entry determines the socially optimal certification authority but also the type of certifier that is most likely to enter in equilibrium. The theory's predictions are empirically testable and shed light on the variety of certifiers across markets and over time.
Classification-JEL: G24, L15, L31
Creation-Date: 2020-11
File-URL: https://doi.org/10.2139/ssrn.3730508
File-Format: text/html
DOI: 10.2139/ssrn.3730508
Keywords: Certification, delegation, entry of firms, investments in quality, private politics
Handle: RePEc:oml:wpaper:202102