Abstract
We develop a decentralized Bayesian model of college admissions with two ranked colleges, heterogeneous students and two realistic match frictions: students find it costly to apply to college, and college evaluations of their applications is uncertain. Students thus face a portfolio choice problem in their application decision, while colleges choose admissions standards that act like market-clearing prices. Enrollment at each college is affected by the standards at the other college through student portfolio reallocation. In equilibrium, student-college sorting may fail: weaker students sometimes apply more aggressively, and the weaker college might impose higher standards. Applying our framework, we analyze affirmative action, showing how it induces minority applicants to construct their application portfolios as if they were majority students of higher caliber.
Highlights
The college admissions process has lately been the object of much scrutiny, both from academics and in the popular press
This paper examines the joint behavior of students and colleges in equilibrium
College enrollments are interdependent, both because the student portfolios depend on the joint college admissions standards, and because students accepted at the better college will not attend the lesser one even if accepted
Summary
The Harvard community has made this article openly available. Please share how this access benefits you. A Supply and demand model of the college admissions problem.
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