Coarse Grades: Informing the Public by Withholding Information†

Coarse Grades: Informing the Public by Withholding Information† AbstractCertifiers 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. (JEL D83, L15, Q48) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Coarse Grades: Informing the Public by Withholding Information†

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Publisher
American Economic Association
Copyright
Copyright © 2018 © American Economic Association
ISSN
1945-7685
D.O.I.
10.1257/mic.20130078
Publisher site
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Abstract

AbstractCertifiers 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. (JEL D83, L15, Q48)

Journal

American Economic Journal: MicroeconomicsAmerican Economic Association

Published: Feb 1, 2018

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