Optimal Quality Certification
AbstractQuality certification not only informs consumers but also stimulates producers to supply better-quality products. We study a problem of quality certification in a moral hazard setting. We show that, under standard assumptions, simple certification systems, such as quality assurance and pass-fail rules, are optimal. Our solution method involves interpreting the certification problem as a delegation problem.
CitationZapechelnyuk, Andriy. 2020. "Optimal Quality Certification." American Economic Review: Insights, 2 (2): 161-76. DOI: 10.1257/aeri.20190387
- D82 Asymmetric and Private Information; Mechanism Design
- L15 Information and Product Quality; Standardization and Compatibility