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A Bias Of Screening

Author

Listed:
  • David Lagziel

    (BGU)

  • Ehud Lehrer

    (Tel Aviv University)

Abstract

This paper deals with the issue of screening. It focuses on a decision maker who, based on noisy unbiased assessments, screens elements from a general set. Our analysis shows that stricter screening not only reduces the number of accepted elements, but possibly reduces their average expected value. We provide a characterization for optimal threshold strategies for screening and also derive implications to cases where such screening strategies are suboptimal. We further provide various applications of our results to credit ratings, auctions, general trade, the Peter Principle, and affirmative action.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • David Lagziel & Ehud Lehrer, 2019. "A Bias Of Screening," Working Papers 1905, Ben-Gurion University of the Negev, Department of Economics.
    • Handle: RePEc:bgu:wpaper:1905
    as

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    File URL: http://in.bgu.ac.il/en/humsos/Econ/Workingpapers/1905.pdf
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    References listed on IDEAS

    as
    1. Sarah Parlane, 2003. "Procurement Contracts under Limited Liability," The Economic and Social Review, Economic and Social Studies, vol. 34(1), pages 1-21.
    2. Edward P. Lazear, 2004. "The Peter Principle: A Theory of Decline," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 141-163, February.
    3. Stiglitz, Joseph E, 1975. "The Theory of "Screening," Education, and the Distribution of Income," American Economic Review, American Economic Association, vol. 65(3), pages 283-300, June.
    4. Lagziel, David, 2019. "Credit auctions and bid caps," Games and Economic Behavior, Elsevier, vol. 113(C), pages 416-422.
    5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Heinsalu, Sander, 2020. "Reversals of signal-posterior monotonicity imply a bias of screening," Journal of Economic Theory, Elsevier, vol. 188(C).
    2. David Lagziel & Ehud Lehrer, 2019. "A Comparison of Noisy Signals in Screening," Working Papers 1904, Ben-Gurion University of the Negev, Department of Economics.

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    More about this item

    Keywords

    screening problem; screening bias; threshold strategies;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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