Testing, Disclosure and Approval

47 Pages Posted: 12 Nov 2016 Last revised: 1 Oct 2019

See all articles by Jacopo Bizzotto

Jacopo Bizzotto

Oslo Business School - OsloMet

Jesper Rüdiger

Universidad Carlos III de Madrid - Department of Business Administration

Adrien Vigier

University of Oxford - Department of Economics

Date Written: October 1, 2019

Abstract

Approvers selecting candidates or certifying products often base their decisions on a mixture of information, some of which is voluntarily disclosed by applicants, and some which they acquire first-hand, by way of tests or otherwise. We examine the interplay between approvers' first-hand information acquisition and applicants' voluntary disclosure. We show that access to cheaper or more accurate information on the part of approvers might impair disclosure by applicants, resulting in overall lower expected payoffs for the approvers. We characterize simple testing rules to which approvers can commit in order to remedy the aforementioned effect and improve their expected payoff.

Keywords: Information Acquisition; Testing; Disclosure; Certification

JEL Classification: C72, D82, D83, G24, G28

Suggested Citation

Bizzotto, Jacopo and Rüdiger, Jesper and Vigier, Adrien, Testing, Disclosure and Approval (October 1, 2019). Available at SSRN: https://ssrn.com/abstract=2868042 or http://dx.doi.org/10.2139/ssrn.2868042

Jacopo Bizzotto

Oslo Business School - OsloMet ( email )

Pilestredet 35
Oslo, 0166
Norway

Jesper Rüdiger (Contact Author)

Universidad Carlos III de Madrid - Department of Business Administration ( email )

Calle Madrid 126
Getafe, Madrid, Madrid 28903
Spain

Adrien Vigier

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

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