Quality disclosure and certification: Theory and practice

David Dranove*, Ginger Zhe Jin

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

304 Scopus citations

Abstract

This essay reviews the theoretical and empirical literature on quality disclosure and certification. After comparing quality disclosure with other quality assurance mechanisms and describing a brief history of quality disclosure, we address two sets of theoretical issues. First, why don't sellers voluntarily disclose through a process of "unraveling" and, given the lack of unraveling, is it desirable to mandate seller disclosure? Second, when we rely on certifiers to act as the intermediary of quality disclosure, do certifiers necessarily report unbiased and accurate information? We further review empirical evidence on these issues, with a particular focus on healthcare, education, and finance. The empirical review covers quality measurement, the effect of third-party disclosure on consumer choice and seller behavior, as well as the economics of certifiers.

Original languageEnglish (US)
Pages (from-to)935-963
Number of pages29
JournalJournal of Economic Literature
Volume48
Issue number4
DOIs
StatePublished - Dec 2010

ASJC Scopus subject areas

  • Economics and Econometrics

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