Abstract

The absence of a platform for secure electronic commerce is widely recognised. Across the globe, a host of Certification Authorities (CAs) have emerged to seize the opportunity for issuing digital certificates that constitute the Public Key Infrastructure (PKI). Yet the take-up of the technology has been bitterly disappointing. The market for digital certificates has failed to reach the critical worldwide mass that was anticipated. Current literature suggests a variety of outstanding technical, legal and policy issues that hinder the adoption of PKI. We argue that another contributing factor in this adverse turn of events is the quality uncertainty surrounding CAs and the certificates they issue. This paper adopts the Lemons principle, an economic theory, to analyse the market situation of quality uncertainty and reviews three countermeasures that remedy this problem: brand names, guarantees and licensing. Applying this economic theory to the PKI market, the paper discusses how these three countermeasures might be used to signal the quality of certificates and hence generate the trust missing between CAs and relying parties in electronic transactions.

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