Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56911
Authors: 
Suzuki, Toru
Year of Publication: 
2011
Series/Report no.: 
Jena economic research papers 2011,013
Abstract: 
A decision maker (DM) wishes to select a competent candidate to fill a position. However, since the wage and task of the position is predetermined, the DM cannot use contract as a screening device. This paper formulates the problem as a class of selection problem and derives the optimal selection procedure. The key element of our selection procedure is voluntary testing. That is, unlike statistical selection procedures, the signal generating process is endogenous. Then, the optimal selection rule takes into account not only the test performances but also signaling element of the test. We analyze the selection procedure as a signaling game and derive the optimal selection rule. Moreover, the optimal size of candidate pool and the selection efficiency are also analyzed. It is shown that, by making the test voluntary, the selection efficiency can be dramatically improved.
Subjects: 
signaling
screening
selection problem
selection procedure
testing
JEL: 
D82
Document Type: 
Working Paper

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