The economics of excuses: Job market cheap talk with pre-employment tests

Abstract

In the job market, managers typically use pre-employment tests to evaluate a candidate's value. Candidates often respond by claiming, in a non-verifiable way, that circumstances not related to their value impair their ability to perform well in the test and, thus, render the test an unreliable source of information. We term such cheap-talk claims excuses. We show that if the candidate's expected performance in the test sufficiently depends on skills orthogonal to the candidate's value, the candidate may credibly use excuses despite the candidate's transparent motives. In equilibrium, excuses lead to a low prior belief about the candidate's value that is later accompanied by a lenient update process of the test's outcomes.