Economics Seminar: Ehud Lehrer

A Failure of Screening and the Rise of Manipulation

Ehud Lehrer, Tel-Aviv University

This paper offers two related insights into the problem of competitive and non-competitive screening.
The first concerns a decision maker who screens elements from a general set based on noisy unbiased assessments.
We show that stricter screening not only reduces the number of accepted elements, but possibly derogates their expected value, leading to a screening failure.
The second insight extends the first to competitive scenarios where valuations and noise are strategic.
We prove that competitors would tend to manipulation, disregarding extensive costs, in their strive to victory.
Various applications are presented, including the fields of credit ratings, sports, news world, political races, trade, and auctions.
(with David Lagziel)