Optimal Quality Certification
- American Economic Review: Insights (Forthcoming)
Quality certification not only informs consumers, but also stimulates producers to supply better quality products. We study a
problem of quality certification in a moral hazard setting. We
show that, under standard assumptions, simple certification systems, such as quality assurance rule and pass-fail rule, are optimal.
Our solution method involves interpreting the certification problem
as a delegation problem.
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