Absract:

Voluntary certification serves as a strategic tool for firms in markets characterized by asymmetric information regarding quality. This paper investigates how heterogeneous firm types strategically choose whether to certify if a profit maximizing third party by request reveals the quality of the firm to the consumer for a fee. I complement existing models by introducing a temporal dimension, where a firm decides when to certify if quality is exogenous. I incorporate multiple firm types (low, middle and high quality) and two periods. In a static model, a high quality firm will choose to separate itself from the lower types by buying the certificate. The introduction of a second period allows to study cases in which some types of the firm decide against certifying as soon as possible. I identify under which conditions the different types adopt distinct certication strategies across periods.

Location:

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