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You are here: Home Seminars 17.10. Micro Theory Seminar: Andrzej Skrzypacz

17.10. Micro Theory Seminar: Andrzej Skrzypacz

Micro Theory Seminar with Andrzej Skrzypacz (Stanford University)

Event details
What
  • Micro Theory Seminar
When Oct 17, 2018
from 16:30 to 17:45
Where lecture hall K
Contact Name Stephan Lauermann
Contact Email
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Topic

Test Design and Minimum Standards

Abstract

We analyze test design and certification standards when an uninformed seller has the option to generate and disclose costly information regarding asset quality. We characterize equilibria by a minimum principle: the test and disclosure policy are chosen to minimize the asset’s value conditional on nondisclosure. Thus, when sellers choose the information provided, simple pass/fail certification tests are likely to dominate the market. A social planner could raise informational and allocative efficiency, and lower deadweight testing costs, by raising the certification standard. Monopolist certifiers also satisfy the minimum principle but set a higher standard and reduce testing rates to maximize revenue.
 

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