Mitigating Adverse Selection In The Chinese Language Services Market

The Chinese language services industry has entered an explosive growth period in recent years as economic globalization has been furthered and information technology has witnessed rapid developments.However,the industry is facing severe risks arising from adverse selection which occurs due to information asymmetry.Language services buyers do not know the true quality of language products because there is no sufficient information for them to identify the true quality of the products and they are only willing to pay according to average quality of the products in the market,driving the high-quality products out of existence,and resulting in a language services market full of low-quality products.As a consequence,Pareto optimality cannot be achieved,which prevents the language services market from functioning efficiently.Language has played an important role in increasing China's soft power,promoting the implementation of the ?Belt and Road Initiative? and ?sharing the Chinese story globally?.How to reduce the adverse selection in the language services market and improve the quality of language services has become a practical and important research topic.Signaling or sending signals of product or service quality is an important mechanism to mitigate adverse selection.The signal means the information provided by sellers that conveys the true quality of the product or service and helps the buyer to evaluate product features when there is information asymmetry.The language services industry includes a wide range of branches and its products have diversified features.The dissertation,therefore,takes translation services as an example and use both qualitative and quantitative methods to analyze why adverse selection takes place and how it exhibits in the language services market.The research focuses on how to send effective signals indicating the quality of the language products for the less informed party,i.e.the buyer in the language services market,addressing three issues as follows.(1)The dissertation first analyzes the features of quality signal needs by language services buyers,including businesses as well as government departments and public institutions.With big data technologies such as web crawlers and databases,more than 20,000 online language services job advertisements are captured which are recently released by the recruiting companies,including language services providers(LSPs).The study on the advertisements shows that most of the job positions require the applicants to provide the certificate and/or diploma describing their foreign language proficiency.The recruiters are facing various language proficiency exams under different names,which are relatively weak quality signals.The strong quality signals,such as translator/interpreter certification exams and Master degree in Translation and Interpretation,are not accepted by the recruiters,because these signals are not quite different from the weak ones or because they are not widely acknowledged.Consequently,most of the recruiters,considering translation competence the same as foreign language proficiency,want applicants to have College English Level 6(CET6)certification.Unaware that translator's competence surpasses pure foreign language proficiency,they rely on weak signals which cannot accurately communicate the high quality of language services products.In addition,12 bidding documents for translation services procurement issued by the Chinese government departments and public institutions from 2016 to the first half of 2019 are selected,and various quality signals and their scores involved in the scoring of the bidding documents are analyzed.The strength of these signals is studied.It is shown that service procedures,pricing,past performance and translation team qualifications of a language services provider are among the top four strong signals indicating translation quality.These government departments and public institutions in question are quite aware of the importance of translation services in the chain of their work and are frequent buyers of language services;therefore,they know the exact requirements for professional translators.The signals they rely on are strong and are consistent with the requirements of translation services.(2)The bidding documents show that past performance and pricing by a LSP are two of the strongest signals.A gaming-based pricing-performance signaling model considering price and performance is established for the language services market.The dynamic game between a single language services provider and multiple language services buyers under incomplete information is studied and conditions for a separating equilibrium is discussed.The influence of pricing signals and performance signals on buyers' willingness to purchase is explored via quantitative methods.An optimal pricing strategy is created for language services providers to ?set prices according to quality?.The model provides an effective means of quantitatively analyzing market conditions and rationalizing pricing.Separating equilibrium is achieved when high price is offered for high quality products and low price for low quality products,but it depends on the parameters in the model,such as the number of two types of buyers in the model,their purchase intent,their reserve price as well as production costs.The model can be used to solve the problem in the real world.A separating equilibrium in a real world can be decided by using the real values of the parameters in the model and measures can be taken to adjust the values of some parameters in the model to bring the market close to a separating equilibrium.The model can also be taken to analyze the optimal pricing in a separating equilibrium by LSPs to maximize their profits.(3)The bidding dcouments also reveal that service procedures of LSPs and translation team qualifications are also strong signals in the language services market.Effective service procedures and translation team qualifications can be demonstrated through certification.As a consequence,certification of individual translators/interpreter and LSPs can be considered a strong signal of product quality in the language services market.A signaling game model involving costs of certification is built,and the conditions for achieving a separating equilibrium and mixed equilibria are quantitatively analyzed.Signaling through certification and pricing strategies are offered for buyers in different equilibria.Then,the decision model for human capital education investment is employed to analyze whether a translator is willing to invest in professional qualification certification.A survey of Australian,British,American and Chinese translator certification systems is conducted in an effort to absorb ideas to reform China Accreditation Test for Translators and Interpreters(CATTI).Finally,the service quality certification of LSPs is studied within the framework of service quality management provided by the ISO9001:2015 quality management systems — requirements.The quality management process of translation services and the SERVQUAL evaluation model of the service quality are established.The AHP(analytic hierarchy process)is used to establish a model for determining the weight of each relevant indicator in the SERVQUAL model.Moreover,a weight determination model is built based on AHP for language services buyers to quantify complicated signals of quality.The dissertation might be novel in following aspects:(1)It focuses on adverse selection in the language services market and discusses how to mitigate its risks through signaling,offering a new perspective on the research of language services industry.(2)Using big data technology,it reveals the features of quality signal needs by Chinese businesses as well as government departments and public institutions.The AHP approach is adopted to create a weight determination model for selecting effective signals of language services product quality.(3)A pricing-performance signaling model and a signaling model for certification are constructed by using game theory.The models provide means to quantitatively analyze signaling and pricing strategies for language services providers.(4)From the perspectives of individual translators/interpreters and LSPs,the issue of qualification certification of translators/interpreters as well as service quality certification of LSPs is discussed;a SERVQUAL evaluation model of the service quality for translation is established,with a weight determination model being created with AHP for each evaluation indicator in SERVQUAL.