Verifiable information design in competitive environments

• Applicant: Dr. Andreas Asseyer
• Subject Area: Economic Theory
• Term: since 2024
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 534386795

Well-functioning markets rely on the provision of credible information about trading partners and traded goods. Certificates, labels, and ratings provide verifiable and, thus, credible information in markets and are ubiquitous in economic life. The economic importance of these sources of verifiable information is rising as environmental, social, and governmental (ESG) dimensions become increasingly relevant to consumption choices, regulatory policy, and investment decisions. In this research project, we aim to analyze how the design and dissemination of verifiable information is shaped by competitive forces. The process of certification involves three different layers: certifiers generate verifiable information for senders who provide the information to receivers. We want to use the tools of microeconomic theory to improve the conceptual understanding of the mechanisms through which competitive forces at each of these three layers affect certification processes. A solid understanding of these mechanisms is essential in order to diagnose inefficiencies in the provision of verifiable information in the economy and to design or improve regulatory interventions such as EU Regulation 462/2013 which fosters competition between credit rating agencies in financial markets. The project is organized into three work packages. Each work package focusses on the effect of competition at one layer. The first work package aims to study the effect of competition between certifiers on the design of certification, certification fees, and the resulting certification and disclosure decisions of senders. An objective of this work package is to clarify the conditions under which stronger competition between certifiers increases or decreases market transparency. In the second work package, we study the effect of competition between senders on certification. An objective of this work package is to analyze whether comparative certification designs - such as product rankings - may be optimally chosen by certifiers and to study how they affect market transparency. In the third work package, we address competition between receivers. An important objective of this work package is to understand under which conditions an increase in competition between receivers benefits or harms senders.

• DFG Programme: Research Grants
• International Connection: Israel
• International Co-Applicant: Ran Weksler, Ph.D.