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Labels

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  • Mark Whitmeyer

Abstract

Labels -- grades, credentials, scores, ratings, ranks -- do two things. They inform receivers, and they give agents something to chase. I study optimal classification when labels must be earned through costly self-selection. I show that exact certification is inefficiently fine: pooling a small bottom interval saves first-order signaling costs while losing only higher-order decision value. I provide sufficient conditions for lower censorship to maximize efficiency as well as for every optimal classification to use finitely many categories.

Suggested Citation

  • Mark Whitmeyer, 2026. "Labels," Papers 2606.26064, arXiv.org.
    • Handle: RePEc:arx:papers:2606.26064
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    File URL: https://arxiv.org/pdf/2606.26064
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