Incomplete information and costly signaling in college admissions

Arbeitspapier

We analyze a college admissions game with asymmetric information between students and colleges. Students' preferences for colleges depend on the observable quality of the schools. In contrast, colleges' preferences for students depend on the latter's abilities, which are private information. Students and schools are matched via a decentralized mechanism in which students signal their abilities with costly observable signals. A closed-form symmetric separating equilibrium of this game that depends on the supply of and demand for schools seats and on college quality is characterized. In this equilibrium, an increase in the number of students, a reduction in the number of school seats or a drop in the quality of schools reduce the incentive of low-ability students to invest in signaling and increase it for high-ability students.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers ; No. 2018-23

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Game Theory and Bargaining Theory: General ; Cooperative Games ; Noncooperative Games ; Bargaining Theory; Matching Theory
• Subject: College Admissions ; Decentralized Mechanisms ; Incomplete Information ; Coordination Problems ; Costly Signaling

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Salgado, Alfredo
• Event: Veröffentlichung
• (who): Banco de México
• (where): Ciudad de México
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/240664
• Last update: 10.03.2025, 11:43 AM CET