Working Paper: NBER ID: w12390
Authors: Ginger Zhe Jin; Andrew Kato; John A. List
Abstract: Using sportscard grading as an example, we employ field experiments to investigate empirically the informational role of professional certifiers. In the past 20 years, professional grading of sportscards has evolved in a way that provides a unique opportunity to measure the information provision of a monopolist certifier and that of subsequent entrants. Empirical results suggest three patterns: the grading certification provided by the first professional certifier offers new information to inexperienced traders but adds little information to experienced dealers. This implies that the certification may reduce the information asymmetry between informed and uninformed parties. Second, compared with the incumbent, new entrants adopt more precise signals and use finer grading cutoffs to differentiate from the incumbent. Third, our measured differentiated grading cutoffs map consistently into prevailing market prices, suggesting that the market recognizes differences across multiple grading criteria.
Keywords: information revelation; professional certification; field experiments
JEL Codes: D8; C93
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Estimated grading cutoffs (C46) | Prevailing market prices (D41) |
| Grading certification from the first professional certifier (PSA) (Z20) | New information to inexperienced traders (G14) |
| Grading certification from the first professional certifier (PSA) (Z20) | Little information added to experienced dealers (D82) |
| New entrants (SGC and BGS) (L26) | More precise signals and finer grading cutoffs compared to incumbent (PSA) (C52) |
| New entrants (SGC and BGS) (L26) | Enhance overall information value in the market (G14) |