A Simple Model of Competitive Testing

36 Pages Posted: 27 Apr 2015 Last revised: 30 Mar 2020

See all articles by Boris Ginzburg

Boris Ginzburg

Universidad Carlos III de Madrid

Date Written: March 29, 2020

Abstract

A number of candidates are competing for a prize. Each candidate is privately informed about his type. The decision-maker who allocates the prize wants to give it to the candidate with the highest type. Each candidate can take a test that reveals his type at a cost. I show that an increase in competition increases information revelation when the cost is high, and reduces it when the cost is low. Nevertheless, the decision-maker always benefits from greater competition. Candidates can be better off if the cost is higher. Mandatory disclosure is Pareto-dominated by voluntary disclosure unless competition is low. Finally, when the test is noisier, candidates are more likely to take it.

Keywords: information disclosure, testing, competition

JEL Classification: D82, D83

Suggested Citation

Ginzburg, Boris, A Simple Model of Competitive Testing (March 29, 2020). Available at SSRN: https://ssrn.com/abstract=2599376 or http://dx.doi.org/10.2139/ssrn.2599376

Boris Ginzburg (Contact Author)

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

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