Test Me If You Can—Providing Optimal Information for Consumers Through a Novel Certification Mechanism

Certifiers such as Stiftung Warentest (Germany), Which? (UK), and Consumer Reports (US) reduce asymmetric information between buyers and sellers by providing credible information about product quality. However, due to their limited testing capacities, they face a set selection problem and test only a subset of all available product models. We show theoretically that, under any current mechanism to select product models for testing, buyers always end up buying suboptimal product models, unless all product models which would be sold under complete information (or all but the overall cheapest one) happen to be tested. Instead, we propose a novel mechanism based on voluntary disclosure, but with the same testing capacity, which always yields the maximum possible consumer surplus and thus weakly dominates any current mechanism. Furthermore, we confirm in a controlled laboratory experiment that our mechanism significantly increases consumer surplus.