Honest certification and the threat of capture
TLDR
In this paper, the authors derive conditions under which reputation enables certifiers to resist capture and show that honest certification requires high prices that may even exceed the static monopoly price, and thus constitutes a natural monopoly.About:
This article is published in International Journal of Industrial Organization.The article was published on 2005-02-01 and is currently open access. It has received 126 citations till now. The article focuses on the topics: Monopoly price & Certification.read more
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The Credit Ratings Game
TL;DR: In this article, the authors provide a model of competition among credit ratings Agencies (CRAs) in which there are three possible sources of conflicts: 1) the CRA conflict of interest of understating credit risk to attract more business; 2) the ability of issuers to purchase only the most favorable ratings; and 3) the trusting nature of some investor clienteles who may take ratings at face value.
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The Credit Ratings Game
TL;DR: In this article, the authors model both the CRA con-tiction of understating credit risk to attract more business, and the issuer con-fection of purchasing only the most favorable ratings (issuer shopping), and examine the eectiveness of a number of proposed regulatory solutions of CRAs.
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How did increased competition affect credit ratings
Bo Becker,Todd T. Milbourn +1 more
TL;DR: The authors found that increased competition from Fitch coincides with lower quality ratings from the incumbents: rating levels went up, the correlation between ratings and market-implied yields fell, and the ability of ratings to predict default deteriorated.
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How Did Increased Competition Affect Credit Ratings
TL;DR: In this paper, the authors empirically examined how increased competition affects the credit ratings market and found that increased competition from Fitch coincides with lower quality ratings from the incumbents, while the correlation between ratings and market-implied yields fell, and the ability of ratings to predict default deteriorated.
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Rating Agencies in the Face of Regulation
TL;DR: The authors developed a theoretical framework to shed light on variation in credit rating standards over time and across asset classes, and showed that introducing rating-contingent regulation that favors highly rated securities may increase or decrease rating informativeness, but unambiguously increases the volume of highly-rated securities.
References
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The Market for “Lemons”: Quality Uncertainty and the Market Mechanism
TL;DR: In this paper, the authors present a struggling attempt to give structure to the statement: "Business in under-developed countries is difficult"; in particular, a structure is given for determining the economic costs of dishonesty.
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Job Market Signaling
TL;DR: In this paper, the authors present a model in which signaling is implicitly defined and explains its usefulness, in which the employer is not sure of the productive capabilities of an individual at the time he/she hires him.
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The Role of Market Forces in Assuring Contractual Performance
Benjamin Klein,Keith B. Leffler +1 more
TL;DR: The conditions under which transactors can use the market (repeat-purchase) mechanism of contract enforcement are examined in this article, where increased price is shown to be a means of assuring contractual performance.
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Premiums for High Quality Products as Returns to Reputations
TL;DR: In this article, an equilibrium price-quality schedule for markets in which buyers cannot observe product quality prior to purchase is derived, and the effects of improved consumer information and of a minimum quality standard on the equilibrium price quality schedule are studied.
Posted Content
A Supergame-Theoretic Model of Price Wars during Booms
Julio J. Rotemberg,Garth Saloner +1 more
TL;DR: In this paper, it is shown that during high demand periods, various oligopolistic industries tend to have relatively low prices and that the increase in competitiveness that results from a shift in demand towards goods produced by oligopolies may be sufficient to raise the output of all sectors.