Test Design Under Falsification

Eduardo Perez (1, 2) , Vasiliki Skreta (3)

1 ECON - Département d'économie (Sciences Po)
2 CEPR - Center for Economic Policy Research
3 University of Texas at Austin [Austin]

We characterize a receiver-optimal test when manipulations are possible in the form of type falsification. Optimal design exploits the following manipulator trade-off: while falsification may lead to better grades, it devalues their meaning. We show that optimal tests can be derived among falsification-proof ones. Our optimal test has a single ‘failing’ grade, and a continuum of ‘passing’ grades. It makes the manipulator indifferent across all moderate levels of falsification. Good types never fail, but bad types may pass. An optimal test delivers at least half of the full-information value to the receiver. A three-grade optimal test also performs well.

Keywords: Information Design; Falsification; Tests; Manipulation; Cheating; Persuasion

Domains: Humanities and Social Sciences; Economics and Finance

Eduardo Perez, Vasiliki Skreta. Test Design Under Falsification. 2018. ⟨hal-03393136⟩