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Test design under voluntary participation

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  • Rosar, Frank

Abstract

An agent who is imperfectly informed about his binary quality can voluntarily participate in a test that generates a public signal. I study the design of the test that allows for optimal learning of the agent's quality when the agent strives for a high perception of his quality but is averse towards perception risk. For a large class of reduced-form utility functions that reflect these properties, the optimal test is binary and not subject to false positives. I uncover the forces that drive this result and show how the problem with endogenous participation can be transformed into a problem to that the concavification approach from the Bayesian persuasion literature applies. Furthermore, for a non-reduced version of my model where the designer estimates the agent's quality but suffers either more from false positives or from false negatives, I show that the same type of test is optimal.

Suggested Citation

  • Rosar, Frank, 2017. "Test design under voluntary participation," Games and Economic Behavior, Elsevier, vol. 104(C), pages 632-655.
  • Handle: RePEc:eee:gamebe:v:104:y:2017:i:c:p:632-655
    DOI: 10.1016/j.geb.2017.06.002
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    Citations

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    Cited by:

    1. Perez-Richet, Eduardo & Vigier, Adrien & Bizzotto, Jacopo, 2019. "Information Design with Agency," CEPR Discussion Papers 13868, C.E.P.R. Discussion Papers.
    2. repec:hal:spmain:info:hdl:2441/31aa5v8jtp9p48jlhrq44psjoa is not listed on IDEAS
    3. Eduardo Perez‐Richet & Vasiliki Skreta, 2022. "Test Design Under Falsification," Econometrica, Econometric Society, vol. 90(3), pages 1109-1142, May.
    4. Jacopo Bizzotto & Eduardo Perez-Richet & Adrien Vigier, 2020. "Communication via Third Parties," Working Papers 202006, Oslo Metropolitan University, Oslo Business School.
    5. Alonso, Ricardo & Câmara, Odilon, 2018. "On the value of persuasion by experts," Journal of Economic Theory, Elsevier, vol. 174(C), pages 103-123.
    6. Laura Doval & Alex Smolin, 2021. "Persuasion and Welfare," Papers 2109.03061, arXiv.org, revised Sep 2023.
    7. Ginzburg, Boris, 2019. "A Simple Model of Competitive Testing," MPRA Paper 99463, University Library of Munich, Germany.
    8. Nikolaus Schweizer & Nora Szech, 2018. "Optimal Revelation of Life-Changing Information," Management Science, INFORMS, vol. 64(11), pages 5250-5262, November.
    9. Choi, Jay Pil & Mukherjee, Arijit, 2019. "Optimal certification policy, entry, and investment in the presence of public signals," Working Papers 2019-6, Michigan State University, Department of Economics.
    10. Marta Serra-Garcia & Nora Szech, 2023. "Incentives and Defaults Can Increase COVID-19 Vaccine Intentions and Test Demand," Management Science, INFORMS, vol. 69(2), pages 1037-1049, February.
    11. Escudé, Matteo & Sinander, Ludvig, 2023. "Slow persuasion," Theoretical Economics, Econometric Society, vol. 18(1), January.
    12. repec:hal:wpspec:info:hdl:2441/31aa5v8jtp9p48jlhrq44psjoa is not listed on IDEAS
    13. Smolin, Alex & Doval, Laura, 2021. "Information Payoffs: An Interim Perspective," TSE Working Papers 21-1247, Toulouse School of Economics (TSE).
    14. Jacopo Bizzotto & Adrien Vigier, 2022. "A Case for Tiered School Systems," Working Papers 202205, Oslo Metropolitan University, Oslo Business School.
    15. Jay Pil Choi & Arijit Mukherjee, 2020. "Optimal certification policy, entry, and investment in the presence of public signals," RAND Journal of Economics, RAND Corporation, vol. 51(4), pages 989-1013, December.
    16. Jacopo Bizzotto & Adrien Vigier, 2022. "Sorting and Grading," Papers 2208.10894, arXiv.org, revised Feb 2024.
    17. Emir Kamenica & Kyungmin Kim & Andriy Zapechelnyuk, 2021. "Bayesian persuasion and information design: perspectives and open issues," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(3), pages 701-704, October.

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    More about this item

    Keywords

    Test design; Bayesian learning; Concavification; False positive; Asymmetric information; Voluntary participation;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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