Essays on Quality Assurance Mechanism

Abstract

Jan Mysliveček Essays on Quality Assurance Mechanisms Abstrakt v češtině - dokument nenalezen

This dissertation studies two quality assurance mechanisms know from markets with unobservable quality characteristics-certification and self-regulation. Certification is a mechanism based on a third party who tests producers and issues, for a fee, a certificate to those who meet the required quality standard. Self-regulation is a mechanism, where producers, rather than relying on a certifier, form a club, set standards, and monitor each other. In the first chapter, I compare certification and self-regulation. I show that if the testing technology is perfect and costless, the choice of standards and fees by the certifying organization (CO) is welfare inferior, while the self-regulatory organization (SRO) chooses a welfare optimal fee, and I identify conditions under which the SRO also chooses optimal standards. If the testing technology is costly and imperfect, this result is not necessarily valid and depends on the difference between the costs of the testing technology available to the CO and SRO. In the second chapter, Tomáš Konečný and I study an example of certification system - Fair Trade scheme. One of the arguments against the Fair Trade scheme is that the guaranteed minimum price tends to depress world prices and thus the incomes of non-participating farmers (e.g. The Economist, 2006). We develop a...