Reversals of signal-posterior monotonicity imply a bias of screening
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Publication:785545
DOI10.1016/J.JET.2020.105073zbMATH Open1447.91046arXiv1910.03117OpenAlexW3033206791MaRDI QIDQ785545FDOQ785545
Authors: Sander Heinsalu 
Publication date: 7 August 2020
Published in: Journal of Economic Theory (Search for Journal in Brave)
Abstract: This note strengthens the main result of Lagziel and Lehrer (2019) (LL) "A bias in screening" using Chambers Healy (2011) (CH) "Reversals of signal-posterior monotonicity for any bounded prior". LL show that the conditional expectation of an unobserved variable of interest, given that a noisy signal of it exceeds a cutoff, may decrease in the cutoff. CH prove that the distribution of a variable conditional on a lower signal may first order stochastically dominate the distribution conditional on a higher signal. The nonmonotonicity result is also extended to the empirically relevant exponential and Pareto distributions, and to a wide range of signals.
Full work available at URL: https://arxiv.org/abs/1910.03117
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