The research paper titled “Optimal Quality Certification” by Andriy Zapechelnyuk is accepted for publication to American Economic Review: Insights.
Summary: Quality certification not only informs consumers, but also stimulates producers to supply better quality products. The paper studies a problem of quality certification in a moral hazard setting. It is shown that, under standard assumptions, simple certification systems, such as quality assurance rule and pass-fail rule, are optimal. The solution method involves interpreting the certification problem as a delegation problem.