Is quality accreditation effective? Evidence from the childcare market

Xiao, Mo

doi:10.1016/j.ijindorg.2010.04.004

Cited by 55 publications

(12 citation statements)

References 37 publications

(35 reference statements)

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“…Similar conclusions are reached by Griffith et al () and Barker, Flynn, Pepper, Bates, and Mikeal () . Xiao () estimates a model to assess the effectiveness and the impact of the national accreditation system for childcare centres on consumer welfare and finds that on average consumers do not gain much information beyond what they infer from a firm's reputation. In a study on ISO 9000 certification, Terlaak and King () find that certified organizations grow faster after certification and that operational improvements do not account for this growth.…”

Section: Introductionmentioning

confidence: 99%

Accreditation in a differentiated duopoly

2019

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Accreditation is increasingly important worldwide; however, some industries have higher accreditation rates than others. We suggest a duopoly model to discuss how market characteristics affect the incentive for firms to seek accreditation. The discussion relates to the effects accreditation might have on the costs and demands in the markets, the degree of product differentiation (addressing both substitutable and complementary goods), type of competition (various Cournot and Bertrand games), and welfare for society. It follows that markets with high accreditation rates are either characterized by fierce competition (price competition in substitutable goods) or by a high degree of coordination (complementarity).

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Section: Introductionmentioning

confidence: 99%

Accreditation in a differentiated duopoly

2019

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“…For instance, Xiao (2010) tests the value of certification in the childcare industry. In childcare, certification is voluntary and usually chosen by only a small fraction of firms.…”

Section: Certification Papersmentioning

confidence: 99%

A dynamic model of certification and reputation

Schaar

Zhang

2014

Proceedings of the Fifteenth ACM Conference on Economics and Computation

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Markets typically have many ways of learning about quality, with two of the most important being reputational forces and certification, and these types of learning often interact with and influence each other. This paper is the first to consider markets where learning occurs through these different sources simultaneously, which allows us to demonstrate the rich interplay and dynamics that can arise. Our work offers four main insights: (1) Without certification, market learning through reputation alone can get "stuck" at inefficient levels and high quality agents may get forced out of the market. (2) Certification "frees" the reputation of agents, allowing good agents to keep working even after an unfortunate string of bad signals. (3) Certification can be both beneficial and harmful, and so the social planner must choose the certification scheme carefully. In particular, the market will tend to demand more certification than socially optimal because the market does not bear the certification costs. (4) Certification and reputational learning can act as complementary forces so that faster information revelation will increase the social welfare generated by certification. URL Link:http://medianetlab.ee.ucla.edu/papers/DynamicCertificationReputation.pdf INTRODUCTIONA market typically has several avenues from which to learn about the quality of an agent, such as the agent's prior work history, or reports from trusted outside sources like a certification board. An agent's work results are often readily available and provide a steady, but noisy, flow of information to the market, continuously updating the agent's reputation. Certification boards also exist in many industries such as healthcare and accounting, and certification verifies that a minimum level of quality has been met. Given that these different sources of information often coexist, important questions are raised regarding how they can, and should, interact in a marketplace. As an example, physicians can become board certified in order to demonstrate their proficiency in a medical specialty, and patients can also learn about physicians through the results of past procedures. In such a market, should board certification be undertaken by a physician immediately, or after some time to allow the market to learn from the doctor's results? And how stringently should the medical board set its certification requirements if it wishes to maximize social welfare? Although a substantial economics literature has explored environments in which markets learn quality through each source of information separately, the combined effects of the two have not yet been well analyzed. We believe this paper is the first to explore markets with access to both sources.Our main results show that certification remains a critical component of a marketplace even when learning can be done through other channels. The key observation is that certification provides a very different kind of information to the market, a type of information that is beneficial both due to its informativeness a...

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“…Finally, learning models have also been extended to study the value of certification systems (Chernew et al 2008;Xiao 2010), TV program choice (Anand and Shachar 2011), fertility decisions (Mira 2007), spousal interactions (Yang, Zhao, Erdem and Koh 2010), bargaining problems (Watanabe 2009), a manager's job assignment problem (Pastorino 2012), human capital investment problems (Stange 2012, Stinebrickner and Stinebrickner 2013, Hoffman and Burks 2013 and voters' decision problems (Knight and Schiff 2010).…”

Section: Other Applications Of Learning Models -Services Insurance mentioning

confidence: 99%

Invited Paper—Learning Models: An Assessment of Progress, Challenges, and New Developments

2013

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Learning models extend the traditional discrete choice framework by postulating that consumers have incomplete information about product attributes, and that they learn about these attributes over time. In this survey we describe the literature on learning models that has developed over the past 20 years, using the model of Erdem and Keane (1996) as a unifying framework. We described how subsequent work has extended their modeling framework, and applied learning models to a wide range of different products and markets. We argue that learning models have contributed greatly to our understanding of consumer behavior, in particular in enhancing our understanding of brand loyalty and long run advertising effects. We also discuss the limitations of existing learning models and discuss potential extensions. One key challenge is to disentangle learning as a source of dynamics from other key mechanisms that may generate choice dynamics (inventories, habit persistence, etc.). Another is to enhance identification of learning models by collecting and utilizing direct measures of signals, perceptions and expectations. 1 Until fairly recently, the logit was much more popular than probit, largely due to computational advantages. But advances in simulation methods, such as the GHK algorithm and Gibbs sampling (see Geweke and Keane (2001), McCulloch, Polson and Rossi (2000)) have greatly increased the popularity of probit, particularly among Bayesians. 2 Thus, learning models play havoc with traditional welfare analysis, as consumer surplus is no longer the area under the demand curve. Parameters of the demand curve are no longer structural parameters of preferences, but depend on the information set (e.g., they can be shifted by advertising). See Erdem, Keane and Sun (2008) for a discussion. 2 exogenously, or "active search," exerting effort to gather information. Or they may do both.A fourth distinction is how consumers learn. They may be Bayesians, or they may update perceptions in some other way. For instance, consumers may over/under weight new information relative to an optimal Bayesian rule, or forget information that was received too far in the past.Learning models were first applied to marketing problems in pioneering work by Roberts and Urban (1988) and Eckstein, Horsky and Raban (1988). 3 But, due to technical limitations of the time (both in computer speed and estimation algorithms), their models had to be quite simple. Roberts and Urban (1988) study how Bayesian consumers learn about a new product from wordof-mouth signals. Consumers in their model are risk averse, but myopic, so there is no active search. In contrast, in Eckstein et al (1988) consumers are forward-looking, and trial purchase is the (only) source of information. But utility is linear, so their model exhibits the "value of information" phenomenon, but not the "brand equity" phenomenon created by risk aversion. For Roberts and Urban (1988) the converse is true. The strong simplifying assumptions of these early models, plus the difficulty of estimating...

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Is quality accreditation effective? Evidence from the childcare market

Cited by 55 publications

References 37 publications

Accreditation in a differentiated duopoly

Accreditation in a differentiated duopoly

A dynamic model of certification and reputation

Invited Paper—Learning Models: An Assessment of Progress, Challenges, and New Developments

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