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Information Design under Falsification

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  • Perez-Richet, Eduardo
  • Skreta, Vasiliki

Abstract

We derive an optimal test when cheating is possible in the form of type falsification. Optimal design exploits the following trade-off: while cheating may lead to better grades, it devalues their meaning. We show that optimal tests can be derived among cheating- proof ones. Our optimal test has a single 'failing' grade, and a continuum of 'passing' grades. It makes the agent indifferent across all moderate levels of cheating. Good types never fail, but bad types may pass. An optimal test delivers at least half of the full information value. A three-grade optimal test also performs well

Suggested Citation

  • Perez-Richet, Eduardo & Skreta, Vasiliki, 2017. "Information Design under Falsification," CEPR Discussion Papers 12271, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12271
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    Cited by:

    1. Artem Hulko & Mark Whitmeyer, 2017. "A Game of Random Variables," Papers 1712.08716, arXiv.org, revised Feb 2018.

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