Working Paper: NBER ID: w15644
Authors: David Dranove; Ginger Zhe Jin
Abstract: This essay reviews the theoretical and empirical literature on quality disclosure and certification. After comparing quality disclosure with other quality assurance mechanisms and describing a brief history of quality disclosure, we address three key theoretical issues: (i) Why don't sellers voluntarily disclose through a process of "unraveling?" (ii) When should government mandate disclosure? and (iii) Do certifiers necessarily report unbiased and accurate information? We further review empirical evidence on these issues, with a particular focus on healthcare, education, and finance. The empirical review covers quality measurement, the effect of third party disclosure on consumer choice and seller behavior, as well as the economics of certifiers.
Keywords: No keywords provided
JEL Codes: D18; D8; L15; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| voluntary seller disclosure (L85) | seller behavior (D21) |
| government-mandated disclosure (G18) | seller behavior (D21) |
| government-mandated disclosure (G18) | consumer choice (D10) |
| financial incentives of certifiers (M52) | accuracy of certifiers' reports (C52) |
| voluntary seller disclosure (L85) | unraveling process (Y60) |
| government-mandated disclosure (G18) | costs and benefits of quality reporting (L15) |