Oligopolistic Certification

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

The paper develops a simple theory of segmentation and fee-setting in certification markets. The basis for the theory is that certifiers offer differentiated tests; for a given object it is more difficult to pass the test of certifier i than the test of certifier j. Given the test standards, certifiers compete for customers via their fee-setting. Segmentation occurs in equilibrium: sellers with low unobservable quality self-select to an easy test and sellers with high unobservable quality self-select to a hard test. Moreover, sellers choosing an easy test pay a lower (endogenous) certification fee than sellers choosing a hard test. These results are consistent with evidence from the market for auditors and other markets, not readily explained by existing theories.
Original languageEnglish
Pages (from-to)20-35
Number of pages16
JournalB.E. Journal of Theoretical Economics
Volume9
Issue number1
DOIs
Publication statusPublished - Mar 2009

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Certification
Seller
Fees
Segmentation
Auditors

Cite this

Oligopolistic Certification. / Hvide, Hans K.

In: B.E. Journal of Theoretical Economics, Vol. 9, No. 1, 03.2009, p. 20-35.

Research output: Contribution to journalArticle

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