Signaling through tests

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dc.contributor.authorFigueroa, Nicolas
dc.contributor.authorGuadalupi, Carla
dc.date.accessioned2025-01-20T17:33:26Z
dc.date.available2025-01-20T17:33:26Z
dc.date.issued2023
dc.description.abstractA firm (sender), privately informed about product quality, chooses a public test. Tests vary in informativeness and return a binary result. The market (receiver) forms interim beliefs based on test informativeness and posteriors based on test results. We show that standard single-crossing does not hold everywhere. A more informative test is less costly to the high type, who fails it less often, while better interim beliefs may benefit either the high or the low type depending on the prior. When a firm's expected quality is low, an increase in interim beliefs makes the market more sensitive to test results. Then the high type has more incentives to choose a more informative test and separation occurs. When a firm's expected quality is high, a further increase in interim beliefs makes the market less sensitive to test results. In this case, the unique equilibrium is pooling with both types choosing a test with intermediate level of informativeness.
dc.fuente.origenWOS
dc.identifier.doi10.1016/j.qref.2023.08.001
dc.identifier.eissn1878-4259
dc.identifier.issn1062-9769
dc.identifier.urihttps://doi.org/10.1016/j.qref.2023.08.001
dc.identifier.urihttps://repositorio.uc.cl/handle/11534/91642
dc.identifier.wosidWOS:001076670900001
dc.language.isoen
dc.pagina.final34
dc.pagina.inicio25
dc.revistaQuarterly review of economics and finance
dc.rightsacceso restringido
dc.subjectSignaling
dc.subjectSingle-crossing property
dc.subjectTests and information structures
dc.subject.ods10 Reduced Inequality
dc.subject.odspa10 Reducción de las desigualdades
dc.titleSignaling through tests
dc.typeartículo
dc.volumen92
sipa.indexWOS
sipa.trazabilidadWOS;2025-01-12
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