DP12202 Strategic Sample Selection

Author(s): Alfredo Di Tillio, Marco Ottaviani, Peter Norman Sørensen
Publication Date: August 2017
Date Revised: March 2020
Keyword(s): Comparison of experiments, Dispersion, Persuasion, Strategic selection, welfare
JEL(s): C72, C90, D82, D83
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12202

This paper develops a notion of multivariate accuracy to characterize the welfare impact of sample selection from a larger presample. Maximal selection benefits or hurts a decision maker with interval dominance ordered preferences if the reverse hazard rate of the data distribution is log-supermodular-as in location experiments with normal noise-or log-submodular. Applying the result to auctions, we show that under non-pathological conditions the information contained in the winning bids decreases as the number of bidders increases. Exploiting a connection to extreme value theory, we quantify the limit amount of information when the presample size goes to infinity, as under perfect competition. In the context of a model of equilibrium persuasion with costly information, we also derive implications for the design of selected experiments when selection is made by an examinee, a biased researcher, or contending sides with the peremptory challenge right to eliminate a number of jurors.