I discuss the role of intermediaries that search out the information of privately informed parties and then choose what to reveal to uninformed parties. My focus is on the strategic manipulation of information by these certification intermediaries. I show that in a class of environments the optimal choice for a monopoly intermediary is to reveal only whether quality is above some minimal standard. Despite this minimal information transmission, the intermediary can capture a large share of the surplus. I also show that competition among intermediaries can lead to full information revelation.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics