Gill, David; Sgroi, Daniel - In: Journal of Economic Theory 147 (2012) 3, pp. 1247-1260
tough test and mitigates the negative impact of failing a soft test. As a result, profits are convex in toughness: the firm … selects either the toughest or softest test available. The toughest test is optimal when consumers start with an unfavorable … prior and receive sufficiently uninformative private signals (an “innovative” product); the softest test is optimal when …