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A Simple Model of Competitive Testing

Ginzburg, Boris (2019): A Simple Model of Competitive Testing.

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A number of candidates are competing for a prize. Each candidate is privately informed about his type. The decision-maker who allocates the prize wants to give it to the candidate with the highest type. Each candidate can take a test that reveals his type at a cost. I show that if competition increases, candidates reveal more information when the cost is high, and less information when it is low. Nevertheless, the decision-maker always benefits from greater competition. If competition is large, mandatory disclosure is Pareto-dominated by voluntary disclosure. When the test is noisier, candidates are more likely to take it.

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