Project screening with tiered evaluation

We study a Bayesian game of two-sided incomplete information in which an agent, who owns a project of unknown quality, considers proposing it to an evaluator, who has the choice of whether or not to accept it. There exist two distinct tiers of evaluation that di¤er in the bene…ts they deliver to the agent upon acceptance of a project. The agent has to select the tier to which the project is submitted for review. Making a proposal incurs a cost on the agent in the form of a submission cost. We examine the e¤ect of changes in the payo¤ parameters at the two tiers of evaluation on the e¢ ciency of the equilibrium outcome. We show that changes in these parameters that are aimed at increasing the level of self-screening exerted by the agent do not necessarily have bene…cial e¤ects either on the quality of projects submitted for review or on the quality of projects that are implemented. From a methodological viewpoint, our paper proposes a novel method of performing comparative statics in games whose equilibria are de…ned by a system of equations with no closed-form solution. JEL Classi…cation: D02, D82.