A Strategic Selection Procedure
AbstractA decision maker (DM) wishes to select a competent candidate to fill a position. However, since the wage and task of the position is predetermined, the DM cannot use contract as a screening device. This paper formulates the problem as a class of selection problem and derives the optimal selection procedure. The key element of our selection procedure is voluntary testing. That is, unlike statistical selection procedures, the signal generating process is endogenous. Then, the optimal selection rule takes into account not only the test performances but also signaling element of the test. We analyze the selection procedure as a signaling game and derive the optimal selection rule. Moreover, the optimal size of candidate pool and the selection efficiency are also analyzed. It is shown that, by making the test voluntary, the selection efficiency can be dramatically improved.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2011-013.
Date of creation: 08 Mar 2011
Date of revision:
Signaling; Screening; Selection problem; Selection procedure; Testing;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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