Less Informative Report Cards May be Better

Mer, 06/04/2022 - 12:00 / 13:00

401, Viale Romania

Speaker: Larry Samuelson , YALE University

We examine a market in which sellers of unknown quality must be matched with heterogeneous buyers. For example, surgeons of varying and unknown ability may match with patients with different needs. “Report cards” may improve the match by providing information about past outcomes and hence allowing agents to update beliefs about sellers’ types, but may also create incentives for sellers to manipulate the information flow by adjusting the types of buyers they serve. For example, surgeons may avoid risky patients. We examine the resulting information design problem, finding that full disclosure may be suboptimal. This is an instance of a more general observation that once a measurement is known to be used for assessment, incentives can arise to manipulate the measurement, potentially eroding its informativeness.