The Principal prefers private revelation when where there exist distributions with a very high average student ability (for exam- ple, the curriculum is more than sufficient to ensure the average student will get admitted by the University, without further information). The intuition is thus. If such a curriculum was publicly reveled, the University’s perception of the average student, under a completely uninformative grad- ing policy, is higher than the threshold for acceptance. But notice, the size of the difference between the University’s belief and the threshold (i.e., the slack in the beliefs) does not affect the Princi- pal’s payoff—every student is getting accepted already. But, when the University is uniformed, the possibility of the curriculum being very high quality increases the ex-ante perception of the average student, allowing for a more persuasive grading policy. Moreover, this is true even if the curriculum is not actually of high quality, because the University still considers it possible. Of course, there is the caveat that the Principal does not inform the University, via the grading policy, about the curriculum, since this would nullify the value from keeping the University is
The Principal prefers private revelation when where there exist distributions with a very high average student ability (for exam- ple, the curriculum is more than sufficient to ensure the average student will get admitted by the University, without further information). The intuition is thus. If such a curriculum was publicly reveled, the University’s perception of the average student, under a completely uninformative grad- ing policy, is higher than the threshold for acceptance. But notice, the size of the difference between the University’s belief and the threshold (i.e., the slack in the beliefs) does not affect the Princi- pal’s payoff—every student is getting accepted already. But, when the University is uniformed, the possibility of the curriculum being very high quality increases the ex-ante perception of the average student, allowing for a more persuasive grading policy. Moreover, this is true even if the curriculum is not actually of high quality, because the University still considers it possible. Of course, there is the caveat that the Principal does not inform the University, via the grading policy, about the curriculum, since this would nullify the value from keeping the University is