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23.10. BGSE Micro Workshop

BGSE Micro Workshop with Claudia Herresthal (University of Bonn)

Event details
What
  • BGSE Workshop
When Oct 23, 2019
from 12:00 to 13:00
Where Room 0.017
Contact Name Frances Dilme
Contact Email
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Topic

Hidden Testing and Selective Disclosure of Evidence



Abstract
 

 A decision maker and an advisor are uncertain about the state of the world. The advisor can sequentially run informative tests and disclose (some or all) of the outcomes to the decision maker. The decision maker then faces a binary choice. Players agree on the optimal choice under certainty, but their preferences are misaligned under uncertainty in that players differ in how they trade off losses from wrong choices. I characterize equilibria of this game. In particular, I compare the case where testing is hidden and the advisor can choose which test outcomes to verifiably disclose to the case where testing is observable. I show that the decision maker is weakly better off when testing is hidden rather than observable if players' preferences are sufficiently misaligned. Otherwise, hidden testing can leave the decision maker strictly worse off. I identify conditions on preference parameters under which both players can be strictly better off when testing is hidden rather than observable. 



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