The College Admissions Problem with Endogenous Choice of Admissions Policy Quality

Abstract

This study analyzes the role of an admissions policy, a stochastic relationship between student caliber and a college`s noisy evaluations of them. The college first announces an admissions policy and its quality, following which a frictional college admissions problem occurs. The college can be better informed of student caliber by adopting a high-quality admissions policy. The change increases the marginal student type, admissions rates, and college utility. The cutoff score, however, varies arbitrarily. At equilibrium, the college sets admissions policy quality lower than the socially optimal level, resulting in an inefficiently large pool of applicants.