The Design and Price of Certification (joint with Yucheng Shang and Ryo Shirakawa)

Mikael Mäkimattila

(Aalto University)

“The Design and Price of Certification (joint with Yucheng Shang and Ryo Shirakawa)”

• Abstract: We consider the design and pricing of certification contracts. A certifier offers a menu of tests to a sender, who holds partial private information about an unknown state and seeks to persuade a receiver.  The selling mechanism gives information to the receiver through two channels: the actual informativeness of the tests and the sender’s choice. In the revenue-maximizing menu, senders whose beliefs exceed an upper threshold purchase a common test, while senders whose beliefs fall below a lower threshold purchase no test. Those with intermediate beliefs purchase distinct tests, so test choice perfectly reveals the sender’s private information. All sender types who purchase a test are indifferent across all options in the menu, and the receiver obtains zero surplus. We also analyze how the results change if the certifier can conceal which test the sender selects.

Face to Face 15.2.71  –  Room 15.1.39