Econometrica: Mar, 2021, Volume 89, Issue 2

Selecting Applicants

https://doi.org/10.3982/ECTA15510
p. 615-645

Alex Frankel

A firm selects applicants to hire based on hard information, such as a test result, and soft information, such as a manager's evaluation of an interview. The contract that the firm offers to the manager can be thought of as a restriction on acceptance rates as a function of test results. I characterize optimal acceptance rate functions both when the firm knows the manager's mix of information and biases and when the firm is uncertain. These contracts may admit a simple implementation in which the manager can accept any set of applicants with a sufficiently high average test score.

Supplemental Material