American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Coarse Grades: Informing the Public by Withholding Information
American Economic Journal: Microeconomics
vol. 10,
no. 1, February 2018
(pp. 210–35)
(Complimentary)
Abstract
Certifiers of quality often report only coarse grades to the public despite having measured quality more finely, e.g., "Pass" or "Certified" instead of "73 out of 100." Why? We show that coarse grades result in more information being provided to the public because the coarseness encourages those of middling quality to apply for certification. Dropping exact grading in favor of the best coarse grading scheme reduces public uncertainty because the extra participation outweighs the coarser reporting. In some circumstances, the coarsest meaningful grading scheme, pass-fail grading, results in the most information.Citation
Harbaugh, Rick, and Eric Rasmusen. 2018. "Coarse Grades: Informing the Public by Withholding Information." American Economic Journal: Microeconomics 10 (1): 210–35. DOI: 10.1257/mic.20130078Additional Materials
JEL Classification
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L15 Information and Product Quality; Standardization and Compatibility
- Q48 Energy: Government Policy