Certification as a Viable Quality Assurance Mechanism: Theory and Suggestive Evidence

CERGE-EI Working Paper No. 288

40 Pages Posted: 18 Jun 2008

See all articles by Katarina Svitkova

Katarina Svitkova

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences

Andreas Ortmann

UNSW Australia Business School, School of Economics

Date Written: February 1, 2006

Abstract

In this paper we address an asymmetric information problem in the fundraising industry, the fundraising problem. The problem arises from donors' lack of information about the quality of charities that solicit donations. We focus on one particular solution of this problem, certification, where an independent agency provides a costly signal, a certificate, to charities that can use it to signal their 'high' quality. Our model is a signaling game involving three types of player: donors, charities and a certifier. We compare the decisions and impact of two types of certifier: one profit maximizing and one nonprofit. The assumptions of our model are derived from stylized facts that we distilled from certification systems currently existing in the fundraising industries of some European countries. While the current manuscript is meant to inform the real-world design and implementation of such a system in the Czech Republic and other transition economies, our work complements the literature on certification and provides results that are different from those reported up to now.

Keywords: experience goods, quality assurance, certification, self-regulation, enforcement

JEL Classification: C72, D21

Suggested Citation

Svitkova, Katarina and Ortmann, Andreas, Certification as a Viable Quality Assurance Mechanism: Theory and Suggestive Evidence (February 1, 2006). CERGE-EI Working Paper No. 288, Available at SSRN: https://ssrn.com/abstract=1147716 or http://dx.doi.org/10.2139/ssrn.1147716

Katarina Svitkova (Contact Author)

Charles University in Prague - CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences ( email )

Politickych veznu 7
Prague, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

Andreas Ortmann

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

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