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Optimal Simple Ratings

Hugo A. Hopenhayn & Maryam Saeedi

The Journal of Industrial Economics2026https://doi.org/10.1111/joie.70025article
AJG 3ABDC A*
Weight
0.50

What the paper says

We study optimal simple rating systems that partition sellers into a finite number of tiers. We show that optimal ratings must be threshold partitions, and that for linear supply and Cournot competition with constant marginal cost, optimal thresholds solve a k‐means clustering problem requiring only the quality distribution. For convex (concave) supply functions, optimal thresholds are higher (lower) than the k‐means solution. For log‐concave distributions, two‐tier certification captures at least 50% of maximum welfare gains from full disclosure, with five tiers typically achieving over 90%. Applications to eBay and Medicare Advantage data illustrate our method.

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https://doi.org/https://doi.org/10.1111/joie.70025

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@article{hugo2026,
  title        = {{Optimal Simple Ratings}},
  author       = {Hugo A. Hopenhayn & Maryam Saeedi},
  journal      = {The Journal of Industrial Economics},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1111/joie.70025},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.