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| Auteurs principaux: | , |
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| Format: | Preprint |
| Publié: |
2026
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| Sujets: | |
| Accès en ligne: | https://arxiv.org/abs/2605.13039 |
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| _version_ | 1866916008627798016 |
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| author | Si, Shuhua Zhou, Yangfan |
| author_facet | Si, Shuhua Zhou, Yangfan |
| contents | A principal decides whether to approve an agent based on a noisy signal (e.g., test scores) generated by the agent. High-quality agents can produce high signals on average at lower cost, but the realizations are subject to noise that depends on the screening technology's precision. We uncover a paradoxical "pitfall of precision": when precision is already high, further improvements reduce screening accuracy and lower the principal's welfare. This occurs because greater precision incentivizes strategic signaling from more low-quality agents, outweighing the direct benefit from improved precision. The pitfall of precision also has implications for statistical discrimination: groups with noisier technologies face lower approval rates yet may be favored ex ante -- a reversal of discrimination. We also examine how commitment power helps mitigate the pitfall. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2605_13039 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Pitfall of Precision in Noisy Signaling Si, Shuhua Zhou, Yangfan Theoretical Economics A principal decides whether to approve an agent based on a noisy signal (e.g., test scores) generated by the agent. High-quality agents can produce high signals on average at lower cost, but the realizations are subject to noise that depends on the screening technology's precision. We uncover a paradoxical "pitfall of precision": when precision is already high, further improvements reduce screening accuracy and lower the principal's welfare. This occurs because greater precision incentivizes strategic signaling from more low-quality agents, outweighing the direct benefit from improved precision. The pitfall of precision also has implications for statistical discrimination: groups with noisier technologies face lower approval rates yet may be favored ex ante -- a reversal of discrimination. We also examine how commitment power helps mitigate the pitfall. |
| title | Pitfall of Precision in Noisy Signaling |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2605.13039 |