The market for halal certification: balancing credibility and complexity

Purpose This paper aims to model how certifier credibility and production-chain complexity jointly shape halal certification pricing. Grounded in signaling theory (Spence, 1973) and credence goods economics, this study extends existing certification market models by endogenizing certifier credibility as a costly investment within a pricing equilibrium – an element largely absent from prior halal certification research. Production-chain complexity is defined as a multidimensional firm-level variable encompassing the number of input categories, processing stages, subcontracting layers and cross-border sourcing depth. Design/methodology/approach A static microeconomic model is developed, with certifiers choosing credibility and price, and firms selecting certifiers based on cost-benefit analysis. The model is solved as a subgame-perfect Nash equilibrium via backward induction. Equilibrium existence is guaranteed by convexity and continuity conditions on cost and willingness-to-pay functions. Credibility indices and complexity indices are operationalized for empirical calibration. Findings Certification price rises with credibility and complexity; complex firms sort into premium tiers; cost-reducing interventions compress price dispersion. Critically, this sorting equilibrium holds only when the demand effect of complexity dominates its audit-cost effect – a boundary condition that identifies the subset of firms for whom premium certification is welfare-improving rather than merely costly. Originality/value The model formalizes credibility as a costly signal and complexity as a dual driver, yielding testable predictions and policy-relevant insights. Unlike prior certification economics models that treat quality as exogenous or focus on a single market side, to the best of the authors’ knowledge, this study is among the first to integrate endogenous credibility, firm heterogeneity and dual-role complexity within a unified subgame-perfect equilibrium framework for a religious certification market. Policy implications include the design of public accreditation registries, targeted SME subsidy programs and standards for blockchain-based traceability that preserve signal integrity.