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Auriol, E; Schilizzi, S G M (2003) ‘’Quality Signaling through Certification. Theory and an application to agricultural seed markets.
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Paper,

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Abstract
We examine the problem of signaling the quality of goods and services when quality is never observable to consumers. The solution to this problem is certication, which acts to transform unobservable credence attributes into observable search attributes. We study the impact of certication systems on market structure and performance. It turns out that the costs of certification, sunk in order to achieve credibility, play a key role in producing an oligopolistic market. We next show that since it involves increasing return to scale, certication is better achieved by an independent body which can either be a private rm or a public agency. We examine the two ways in which quality provision through certication may be financed (i.e. public and private), and identify the conditions under which each is most efficient. Finally we examine the relevance of the model by studying the role of certication in quality seed provision for agriculture. Overall, model predictions are compatible with the conclusions of this empirical study.

Keywords: certification, finance, markets, quality seed provision

Relevance to our study:
The paper looks at the issue of quality goods and services in relation to consumers. Useful information is given on certification systems impact on market structures and performance.

Relevancy on a scale from 1 to 5 = 4

Review status: Finished
Review started on 2009–06–25
Reviewed by Jane Vine?

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