  We examine the design of optimal rating systems in the presence of moral
hazard. First, an intermediary commits to a rating scheme. Then, a
decision-maker chooses an action that generates value for the buyer. The
intermediary then observes a noisy signal of the decision-maker's choice and
sends the buyer a signal consistent with the rating scheme. Here we fully
characterize the set of allocations that can arise in equilibrium under any
arbitrary rating system. We use this characterization to study various design
aspects of optimal rating systems. Specifically, we study the properties of
optimal ratings when the decision-maker's effort is productive and when the
decision-maker can manipulate the intermediary's signal with a noise. With
manipulation, rating uncertainty is a fairly robust feature of optimal rating
systems.
