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The Optimal Choice of Pre-launch Reviewer: How Best to Transmit Information using Tests and Conditional Pricing

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  • Gill, David
  • Sgroi, Daniel

Abstract

A principal who knows her type can face public testing to help attract endorsements from agents. Tests are pass/fail and have an innate toughness (bias) corresponding to a trade-off between the higher probability of passing a softer test and the greater impact on agents’ beliefs from passing a tougher test. Conditional on the test result, the principal also selects the price of endorsement. The principal always wants to be tested, and chooses the toughest or softest test available depending upon the precision of the agents’ and tests’ information. Applications abound in industrial organization, political economy and labor economics.

Suggested Citation

  • Gill, David & Sgroi, Daniel, 2008. "The Optimal Choice of Pre-launch Reviewer: How Best to Transmit Information using Tests and Conditional Pricing," Economic Research Papers 269888, University of Warwick - Department of Economics.
    • Handle: RePEc:ags:uwarer:269888
    DOI: 10.22004/ag.econ.269888
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    Cited by:

    1. Kwiek, Maksymilian, 2010. "Competition among mass media," Discussion Paper Series In Economics And Econometrics 1013, Economics Division, School of Social Sciences, University of Southampton.
    2. Ting Liu & Pasquale Schiraldi, 2012. "New product launch: herd seeking or herd preventing?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 51(3), pages 627-648, November.

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    More about this item

    Keywords

    Demand and Price Analysis; Teaching/Communication/Extension/Profession;

    JEL classification:

    • 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
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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