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We investigate a distortion in the labour market that is rampant in developing countries and occurs in the form of inaccurate estimation of the innate talents of employees. We characterise the optimal level of difficulty in a predictive task that an employer, who acts as the evaluator, must choose in order to have the least noise in the talent estimation process. Contrary to the standard noise minimization result, our model re affirms the staffing policy of throwing employees in the deep end. We also find that the evaluator will not benefit from knowing the result of the predictive task set from beforehand.
We study information transmission where an informed media, whose interests are partially in conflict with a finite group of rational voters, transmits news items in an attempt to manipulate democratic decisions. In a common-interest two-alternative voting model where due to reputation concerns the media can credibly commit to send any news reliably, we show that even if voters welcome the news when it arrives, media's presence can hurt their ex-ante welfare in both large and small constituencies.
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