Certification as a viable quality assurance mechanism in transition economies: evidence, theory, and open questions

Abstract

In this article we discuss a form of enforcement that relies much less, or not at all, on the state, and that relies on the market only indirectly: Certification agencies force their members to reveal their (good) type through costly signals that can be “engineered” to induce a separating equilibrium. We discuss the viability of this system of enforcement in an environment where state and market have failed to deliver a satisfying degree of quality assurance (namely, fundraising), and also discuss related information systems and systems of quality assurance