Student Portfolios and the College Admissions Problem

46 Pages Posted: 20 Mar 2009 Last revised: 11 Mar 2013

See all articles by Hector Chade

Hector Chade

Arizona State University (ASU) - Economics Department

Gregory Lewis

Harvard University; National Bureau of Economic Research (NBER)

Lones Smith

University of Wisconsin at Madison - Department of Economics

Date Written: March 9, 2013

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.

Suggested Citation

Chade, Hector and Lewis, Gregory and Smith, Lones, Student Portfolios and the College Admissions Problem (March 9, 2013). Available at SSRN: https://ssrn.com/abstract=1358343 or http://dx.doi.org/10.2139/ssrn.1358343

Hector Chade

Arizona State University (ASU) - Economics Department ( email )

PO Box 873806
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Gregory Lewis (Contact Author)

Harvard University ( email )

Littauer Center
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United States
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HOME PAGE: http://www.economics.harvard.edu/faculty/lewis

National Bureau of Economic Research (NBER) ( email )

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Lones Smith

University of Wisconsin at Madison - Department of Economics ( email )

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Madison, WI 53706-1393
United States
608-263-3871 (Phone)
608-262-2033 (Fax)

HOME PAGE: http://www.lonessmith.com

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