American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
A Bias of Screening
American Economic Review: Insights
vol. 1,
no. 3, December 2019
(pp. 343–56)
Abstract
This paper deals with the issue of screening. It focuses on a decision maker who, based on noisy unbiased assessments, screens elements from a general set. Our analysis shows that stricter screening not only reduces the number of accepted elements, but possibly reduces their average expected value. We provide a characterization for optimal threshold strategies for screening and also derive implications to cases where such screening strategies are suboptimal. We further provide various applications of our results to credit ratings, auctions, general trade, the Peter Principle, and affirmative action.Citation
Lagziel, David, and Ehud Lehrer. 2019. "A Bias of Screening." American Economic Review: Insights 1 (3): 343–56. DOI: 10.1257/aeri.20180578Additional Materials
JEL Classification
- C38 Multiple or Simultaneous Equation Models: Classification Methods; Cluster Analysis; Principal Components; Factor Models
- D44 Auctions
- F10 Trade: General
- G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
- J15 Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination