Certification Design with a Privately Informed Sender

We study a monopolistic market for certification services where a certifier administers a given test to potential workers who hold private information about their value. In this environment, workers inherently take into account informational peer effects in the sense that they are willing to pay to be affiliated with higher-quality groups of workers. This willingness to pay depends on the test design and the workers' private information. We show that this dependence endogenously translates into a condition akin to the single-crossing condition. We use this condition to analyze the certifier's optimal selling mechanism and its optimal test design.

Joint with Ran Weksler.