Information Design Under Falsification

60 Pages Posted: 11 Sep 2017

See all articles by Eduardo Perez-Richet

Eduardo Perez-Richet

Sciences Po

Vasiliki Skreta

University of Texas at Austin - Department of Economics; University College London

Date Written: September 2017

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 and Skreta, Vasiliki, Information Design Under Falsification (September 2017). CEPR Discussion Paper No. DP12271, Available at SSRN: https://ssrn.com/abstract=3035265

Eduardo Perez-Richet (Contact Author)

Sciences Po ( email )

28, rue des Saints-Pères
Paris, Paris 75007
France

Vasiliki Skreta

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

HOME PAGE: http://vskreta.wixsite.com/vskreta

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

HOME PAGE: http://vskreta.wixsite.com/vskreta

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