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arXiv · 2606.26064

Labels

Mark Whitmeyer
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Abstract

Labels -- grades, credentials, scores, ratings, ranks -- do two things. They inform receivers, and they give agents something to chase. I study optimal classification when labels must be earned through costly self-selection. I show that exact certification is inefficiently fine: pooling a small bottom interval saves first-order signaling costs while losing only higher-order decision value. I provide sufficient conditions for lower censorship to maximize efficiency as well as for every optimal classification to use finitely many categories.

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Mark Whitmeyer. 2026-06-24. Labels. https://arxiv.org/abs/2606.26064

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