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 | Dauphine, A403 |
Informative Certification: Screening vs. Acquisition (joint work with Roland Strausz, Humboldt University)
We study monopolistic certification in a buyer-seller relationship, explicitly distinguishing between its role as a device for screening (providing soft information) versus acquisition (providing hard information). We show that, optimally, a monopolistic certifier provides maximal soft information, while non-maximal hard information. Thus, monopolistic certification exhibits no economic distortions as a screening device, resolving all private information, but provides too little hard information as an acquisition device. While feasible and costless, full information acquisition is suboptimal as it requires excessive information rents. Consequently, market inefficiencies remain due to market uncertainty but not due to private information.
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