Fear of rejection? Tiered certification and transparency

Emmanuel Farhi, Josh Lerner, Jean Tirole

    Research output: Contribution to journalArticlepeer-review

    20 Scopus citations

    Abstract

    Product quality certifiers may not reveal the identity of unsuccessful applicants/sellers for three reasons. First, they respond to the desire of individual sellers to avoid the stigma from rejection. Second, nontransparency helps a certifier to increase his market power by raising the stigma from lower-tier certification. Third, transparency does not help screen among heterogeneous sellers. Strategic complementarities arise as sellers move down the certification pecking order and lead to the stigmatization of the lower tiers. Mandating transparency benefits the sellers but has an ambiguous impact on buyers, who actually become less informed about product quality.

    Original languageEnglish (US)
    Pages (from-to)610-631
    Number of pages22
    JournalRAND Journal of Economics
    Volume44
    Issue number4
    DOIs
    StatePublished - Dec 2013

    ASJC Scopus subject areas

    • Economics and Econometrics

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