Working Paper: NBER ID: w20074
Authors: Daniel W. Elfenbein; Raymond Fisman; Brian McManus
Abstract: Quality certification programs help consumers to identify high-quality products or sellers in markets with information asymmetries. Using data from eBay UK's online marketplace, we study how certification's impact on consumer demand varies with market- and seller-level attributes, exploiting quasi-experimental variation in sellers' certification status. The positive effects of eBay's "top rated seller" certification are stronger for categories with relatively few other certified sellers, in more competitive markets, and for sellers with shorter records of past performance. These findings indicate certification provides its greatest value when certification is rare, the product space is crowded, and for sellers lacking established reputations.
Keywords: Quality Certification; Consumer Demand; Market Structure; Seller Reputation
JEL Codes: D82; L15; L25; L86
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Top Rated Seller (TRS) certification (F19) | increase in demand (J23) |
| fewer certified sellers (L81) | greater value of certification (L15) |
| low Herfindahl-Hirschman Index (HHI) scores (L19) | larger impact of TRS badge (R48) |
| low prior transaction histories (N21) | greater certification effect (C92) |
| increased prevalence of TRS certification (R59) | negative effect on sales of non-certified sellers (F61) |