TY - JOUR
T1 - Raising the Bar
T2 - Certification Thresholds and Market Outcomes
AU - Hui, Xiang
AU - Saeedi, Maryam
AU - Spagnolo, Giancarlo
AU - Tadelis, Steven
N1 - Publisher Copyright:
© 2023, American Economic Journal: Microeconomics. All Rights Reserved.
PY - 2023
Y1 - 2023
N2 - Certification of sellers by trusted third parties helps alleviate information asymmetries in markets, yet little is known about the impact of a certification’s threshold on market outcomes. Exploiting a policy change on eBay, we study how a more selective certification threshold affects the distribution of quality and incumbent behavior. We develop a stylized model that shows how changes in selectivity change the distribution of quality and prices in markets. Using rich data from hundreds of online categories on eBay.com, we find support for the model’s hypotheses. Our results help inform the design of certification selectivity in electronic and other markets.
AB - Certification of sellers by trusted third parties helps alleviate information asymmetries in markets, yet little is known about the impact of a certification’s threshold on market outcomes. Exploiting a policy change on eBay, we study how a more selective certification threshold affects the distribution of quality and incumbent behavior. We develop a stylized model that shows how changes in selectivity change the distribution of quality and prices in markets. Using rich data from hundreds of online categories on eBay.com, we find support for the model’s hypotheses. Our results help inform the design of certification selectivity in electronic and other markets.
UR - https://www.scopus.com/pages/publications/85163303703
U2 - 10.1257/mic.20210179
DO - 10.1257/mic.20210179
M3 - Article
AN - SCOPUS:85163303703
SN - 1945-7669
VL - 15
SP - 599
EP - 626
JO - American Economic Journal: Microeconomics
JF - American Economic Journal: Microeconomics
IS - 2
ER -