Reversals of signal-posterior monotonicity imply a bias of screening

Sander Heinsalu

Journal of Economic Theory, 2020, vol. 188, issue C

Abstract: The main result of Lagziel and Lehrer (2019) (LL) “A bias in screening” is generalized, and also derived using Chambers and 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 given a lower signal may first order stochastically dominate the distribution given a higher signal.

Keywords: Filtering; Bayes' rule; Updating; Posterior beliefs; Stochastic dominance; Screening (search for similar items in EconPapers)
JEL-codes: C11 C60 D01 D81 D83 D84 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Reversals of signal-posterior monotonicity imply a bias of screening (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:188:y:2020:i:c:s0022053120300697

DOI: 10.1016/j.jet.2020.105073

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