Reversals of signal-posterior monotonicity imply a bias of screening

DOI10.1016/J.JET.2020.105073MaRDI QIDQ785545zbMATH OpenOpenAlexFDO

Authors Sander Heinsalu

Publication date 7 August 2020

Published in Journal of Economic Theory (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1910.03117

zbMATH Keywords

screeningstochastic dominancefilteringupdatingposterior beliefsBayes' rule

Mathematics Subject Classification ID

Decision theory (91B06) Inequalities; stochastic orderings (60E15)

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.

Recommendations

• Reversals of signal-posterior monotonicity for any bounded prior
• Monotonicity in direct revelation mechanisms
• Adverse selection without single crossing: monotone solutions
• DEALING WITH MONOTONICITY CONSTRAINTS IN SCREENING PROBLEMS: THE PRINCIPAL-AGENT MODEL
• Sequential versus static screening: an equivalence result

Cites work

• Reversals of signal-posterior monotonicity for any bounded prior

Cited in

(1)

• Reversals of signal-posterior monotonicity for any bounded prior

This page was built for publication: Reversals of signal-posterior monotonicity imply a bias of screening

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q785545)