Rating Certificate Authorities: a market approach to the Lemons problem

This paper re-examines the problem of information asymmetry in the digital certificates market (Backhouse et al., 2003). It aims to discuss how market mechanisms such as rating systems may be more efficient than regulatory interventions in resolving the Lemons problem in this market. In this research, we discuss the concept of rating systems in the economics literature, and explore their value as signaling devices for overcoming asymmetries of information and promoting trust between certification authorities and relying parties. To operationalize this concept, we further suggest the use of semantic analysis as a method to signal the operational risk associated with each certificate authority. We also provide an example of how semantic analysis may be used as a technique to rate the operational risk of certificate authorities. The paper contributes to the current efforts seeking to resolve problems of trust in the digital certificate market, and provides some conceptual ideas for further research in this area.