Abstract
Over the past three decades, many universities in China provide students with the Second Major program, aiming at cultivating interdisciplinary talents and meeting the undergraduates’ increasing demands for a wide variety of knowledge. In general, the Admissions Committee often attaches importance to the applicants’ previous academic records rather than their willingness to study during the process of selection, which tends to result in the adverse selection problem. Besides, as the Second Major education system fails to incorporate an appropriate incentive compatible mechanism, many enrolled students with low level of learning initiative would be prone to moral hazard problems, such as truancy, chronic absence and poor performance in class. In order to solve the above two kinds of problems and improve the quality of education, we first propose a novel pricing strategy bundling tuition fees and course quantities based on the principal-agent theory, which is designed to mitigate the adverse selection problem by identifying applicants’ private information (the level of their willingness to study) and enable the Admissions Committee to select those applicants with both strong academic ability and high learning willingness. Then we set up the incentive models for the full and limited liability scholarship systems respectively to address the moral hazard problems, and find that the infeasible full liability scholarship system can simultaneously optimize the utility of all participants, while the feasible limited liability scholarship system would only bring about the sub-optimal results.
Highlights
With the extensive demand for interdisciplinary talents in various fields of society, more and more universities begin to set up Second Major programs, and pursuing a second major has become a way for college students to expand the breadth of knowledge and improve their own abilities
There existed a weird phenomenon that applicants with low level of study initiative rather than those with high level have more opportunities to be accepted into a second major program, which is called "adverse selection"
In order to solve the problem of adverse selection in the Second Major program, we design a charging mechanism bundling “Tuition Fee” and “Course Quantity”, which can be noted by (F, Q), where F represents the one-time tuition fee charged by the school and Q denotes the quantity of courses included in the program
Summary
With the extensive demand for interdisciplinary talents in various fields of society, more and more universities begin to set up Second Major programs, and pursuing a second major has become a way for college students to expand the breadth of knowledge and improve their own abilities. Two Chinese researchers conducted a welfare analysis on the issue of “charged private tutoring of in-service teachers” based on principal-agent theory, and put forward the “low frequency regulation” and “high violation cost” collocation mode to reduce the regulatory costs [19] Another interesting research focused on the information asymmetry problem between family and school in the education chain, and proposed a set of solutions based on the “principal-agent” theory to promote the synergy between family education and school education [20]. The problems of “adverse selection” and “moral hazard” in the current Second Major programs are obviously not conducive to the realization of the origin benign goals of these programs, and will result in deadweight welfare loss In this regards, it’s meaningful to conduct deep research on this issue. For students with low level of study initiative, we provides them with a weakened "Tuition Fee-Course Quantity" option, so as to avoid crowding-out effect and moral hazard problems
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