The Optimal Choice of Pre-launch Reviewer: How Best to Transmit Information using Tests and Conditional Pricing

David Gill () and Daniel Sgroi

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: A principal who knows her type can face public testing to help attract endorsements from agents. Tests are pass/fail and have an innate toughness (bias) corresponding to a trade-off between the higher probability of passing a softer test and the greater impact on agents’ beliefs from passing a tougher test. Conditional on the test result, the principal also selects the price of endorsement. The principal always wants to be tested, and chooses the toughest or softest test available depending upon the precision of the agents’ and tests’ information. Applications abound in industrial organization, political economy and labor economics.

Keywords: tests; reviewers; Bayesian learning; information transmission; bias; marketing (search for similar items in EconPapers)
JEL-codes: D82 D83 L15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta
Date: 2008
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Persistent link: http://EconPapers.repec.org/RePEc:wrk:warwec:877

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