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Informative Certification: Screening vs. Acquisition

Author

Listed:
  • Gorkem Celik

    (ESSEC)

  • Strausz Roland

    (HU Berlin)

Abstract

We study monopolistic certification in a buyer-seller relationship, explicitly distinguishing between its role as a device for screening versus acquisition. As a screening device, certification discloses soft information about a seller's private information. As an acquistion device, certification discloses hard information about the good's quality. Despite being costless, we show that, optimally, a monopolistic certifier provides non-maximal information-acquisition, while offering maximal screening. Thus, monopolistic certification exhibits no economic distortions as a screening device, resolving all private information, but provides too little hard information as an acquisition device. While feasible and costless, full information acquisition is suboptimal as it requires excessive information rents. Consequently, market inefficiencies remain due to market uncertainty but not due to private information.

Suggested Citation

  • Gorkem Celik & Strausz Roland, 2025. "Informative Certification: Screening vs. Acquisition," Rationality and Competition Discussion Paper Series 525, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:525
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    More about this item

    Keywords

    certification; disclosure; screening; information acquisition; monopolistic distortions;
    All these keywords.

    JEL classification:

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

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