Market Structure, Reputation, and the Value of Quality Certification

Quality certification programs are used to improve consumers' ability to identify high-quality products or sellers in markets with information asymmetries. Using data from eBay UK's online marketplace, we study how certification's benefits vary with market- and seller-level attributes, exploiting quasi-experimental variation in sellers' certification status. The positive effects of eBay's "top rated seller" certification are stronger for categories with relatively few other certified sellers, in more competitive markets, and for sellers with shorter records of past performance. These findings indicate certification provides its greatest value when certification is rare, the product space is crowded, and for sellers lacking established reputations.