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arXiv · 2301.13449

Certification Design for a Competitive Market

Andreas A. Haupt·Nicole Immorlica·Brendan Lucier
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Abstract

Motivated by applications such as voluntary carbon markets and educational testing, we consider a market for goods with varying but hidden levels of quality in the presence of a third-party certifier. The certifier can provide informative signals about the quality of products, and can charge for this service. Sellers choose both the quality of the product they produce and a certification. Prices are then determined in a competitive market. Under a single-crossing condition, we show that the levels of certification chosen by producers are uniquely determined at equilibrium. We then show how to reduce a revenue-maximizing certifier's problem to a monopolistic pricing problem with non-linear valuations, and design an FPTAS for computing the optimal slate of certificates and their prices. In general, both the welfare-optimal and revenue-optimal slate of certificates can be arbitrarily large.

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Andreas A. Haupt, Nicole Immorlica, Brendan Lucier. 2023-01-31. Certification Design for a Competitive Market. https://arxiv.org/abs/2301.13449

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