Two-Sided Reputation in Certification Markets

In a market where sellers solicit certification to overcome asymmetric information, we show that the profit of a monopolistic certifier can be hump-shaped in its reputation for accuracy: a higher accuracy attracts high-quality sellers but sometimes repels low-quality sellers. As a consequence, reputational concerns may induce the certifier to reduce information quality, thus depressing welfare. The entry of a second certifier impacts reputational incentives: when sellers only solicit one certifier, competition plays a disciplining role and the region where reputation is bad shrinks. Conversely, this region may expand when sellers hold multiple certifications. This paper was accepted by Gustavo Manso, finance.

• 저널Management Science · 64(10) · 4755–4774
• 토픽Auction Theory and Applications · Management Science and Operations Research
• DOI10.1287/mnsc.2017.2742
• 저자Matthieu Bouvard, Raphaël Lévy