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Selling Certification of Private and Market Information

Author

Listed:
  • Gorkem Celik
  • Roland Strausz

Abstract

We consider a monopolistic certifier selling certification services to a partially privately informed seller. The certifier can enable the seller to disclose her private information publicly, as well as gather additional market information about the good's quality publicly. We show that the certifier's optimal contract exhibits maximal disclosure but non-maximal information-gathering. Thus, optimal contracts eliminate private information but not market uncertainty; even though the latter would be costless, it is suboptimal as it requires excessive information rents to the seller. Thus, market inefficiencies remain due to market uncertainty but not due to private information.

Suggested Citation

  • Gorkem Celik & Roland Strausz, 2024. "Selling Certification of Private and Market Information," Berlin School of Economics Discussion Papers 0045, Berlin School of Economics.
    • Handle: RePEc:bdp:dpaper:0045
    DOI: 10.48462/opus4-5576
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    More about this item

    Keywords

    certification; disclosure; information gathering; optimal information revelation; private information;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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