TY - JOUR
T1 - Screening Dominance
T2 - A Comparison of Noisy Signals
AU - Lagziel, David
AU - Lehrer, Ehud
N1 - Funding Information:
* Lagziel: Ben-Gurion University of the Negev (email: Davidlag@bgu.ac.il); Lehrer: Tel Aviv University and INSEAD (email: Lehrer@post.tau.ac.il). Leslie Marx was coeditor for this article. For their valuable comments, the authors wish to thank Omer Edhan, Dima Shaiderman, Eilon Solan, and Anna Zseleva, as well as the participants of the Adam Smith Business School Microtheory Seminar, the Manchester Economic Theory Seminar, ORSIS 2019, the Tel Aviv University Game Theory and Mathematical Economics Research Seminar, the Technion Game Theory Seminar, and the Bar Ilan University Game Theory Seminar. Lagziel acknowledges the support of the Israel Science Foundation, Grant #513/19.
Publisher Copyright:
© 2022, American Economic Journal: Microeconomics. All Rights Reserved.
PY - 2022/1/1
Y1 - 2022/1/1
N2 - This paper studies the impact of noisy signals on screening processes. It deals with a decision problem in which a decision-maker screens a set of elements based on noisy unbiased evaluations. Given that the decision-maker uses threshold strategies, we show that additional binary noise can potentially improve a screening, an effect that resembles a “lucky coin toss.” We compare different noisy signals under threshold strategies and optimal ones, and we provide several characterizations of cases in which one noise is preferable over another. Accordingly so, we establish a novel method to compare noise variables using a contraction mapping between percentiles.
AB - This paper studies the impact of noisy signals on screening processes. It deals with a decision problem in which a decision-maker screens a set of elements based on noisy unbiased evaluations. Given that the decision-maker uses threshold strategies, we show that additional binary noise can potentially improve a screening, an effect that resembles a “lucky coin toss.” We compare different noisy signals under threshold strategies and optimal ones, and we provide several characterizations of cases in which one noise is preferable over another. Accordingly so, we establish a novel method to compare noise variables using a contraction mapping between percentiles.
UR - http://www.scopus.com/inward/record.url?scp=85163391803&partnerID=8YFLogxK
U2 - 10.1257/mic.20200284
DO - 10.1257/mic.20200284
M3 - Article
AN - SCOPUS:85163391803
SN - 1945-7669
VL - 14
SP - 1
EP - 24
JO - American Economic Journal: Microeconomics
JF - American Economic Journal: Microeconomics
IS - 4
ER -