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Coarse Grades: Informing the Public by Withholding Information

Author

Listed:
  • Rick Harbaugh
  • Eric Rasmusen

Abstract

Certifiers of quality often report only coarse grades to the public despite having measured quality more finely, e.g., "Pass" or "Certified" instead of "73 out of 100." Why? We show that coarse grades result in more information being provided to the public because the coarseness encourages those of middling quality to apply for certification. Dropping exact grading in favor of the best coarse grading scheme reduces public uncertainty because the extra participation outweighs the coarser reporting. In some circumstances, the coarsest meaningful grading scheme, pass-fail grading, results in the most information.

Suggested Citation

  • Rick Harbaugh & Eric Rasmusen, 2018. "Coarse Grades: Informing the Public by Withholding Information," American Economic Journal: Microeconomics, American Economic Association, vol. 10(1), pages 210-235, February.
    • Handle: RePEc:aea:aejmic:v:10:y:2018:i:1:p:210-35
    Note: DOI: 10.1257/mic.20130078
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    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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