Platform Certification and Seller Disclosure in Online Selling

Problem definition: Concern about product quality due to the inability to experience products physically has been a major factor that hinders consumers from purchasing online. To ease such concerns, online platforms and sellers have been engaged in various activities to reveal product quality information. Platform can provide certification to products sold via its marketplace, and sellers can voluntarily disclose their private quality information. Despite platform certification and seller disclosure being prevalent quality information revelation methods, the interaction between them has been seldom examined. In this study, we develop a game-theoretical model to analytically explore the implications of platform certification and seller disclosure in an online selling context. Methodology/results: We consider a continuum of sellers offering new products to end consumers through an online platform under one of two pricing schemes: (1) pay-per-transaction (commission fees) or (2) pay-per-listing (listing fees). Consumers hold prior beliefs about product quality and update them based on the observed platform certification and seller disclosure behavior. Our analysis shows that under the commission fee scheme, platform certification serves an informational role by influencing sellers’ disclosure strategies and enhancing consumers’ ability to infer quality. Platform certification always benefits the platform but may either benefit or hurt sellers, depending on their quality levels. Under the listing fee scheme, platform certification instead serves an enrollment role: the platform sets a certification standard to enhance consumers’ quality expectation toward nondisclosure sellers, thereby encouraging more sellers to participate in online selling. In this case, platform certification continues to benefit the platform but does not affect sellers’ disclosure behavior or profitability. We further demonstrate that our main findings remain robust across various alternative model specifications. Managerial implications: Our analysis reveals that the interplay between platform certification and seller disclosure generates nontrivial effects for both platforms and sellers. Platforms should carefully design its certification strategies in alignment with pricing structures, and sellers should adjust their disclosure strategies in response to platform certification decisions.

Funding: This work was supported by the Research Grants Council of Hong Kong (RGC Reference Number: 15503022), the National Natural Science Foundation of China [72588101, 72325005, 72401197, 72531007, 71971184], and the Joint Supervision Scheme of the Hong Kong Polytechnic University (Project ID: P0039360).

Supplemental Material: The online appendices are available at https://doi.org/10.1287/msom.2024.1291.