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Competitive Screening and Information Transmission

40 Pages Posted: 28 Jul 2017  

Inácio Bó

WZB Berlin Social Science Center

Chiu Yu Ko

National University of Singapore (NUS) - Department of Economics

Date Written: July 2017

Abstract

We consider a simple model of the competitive screening of students by schools and colleges. Students apply to schools which then perform costly screening procedures of the applicants to select those with high ability. Students who receive more than one offer may choose among those. Colleges select students and can observe the school which they attended. We show a channel through which students' preferences affect schools' screening decisions and outcomes: as schools increase the screening for high-ability students, a greater proportion of them is identified as such by multiple schools and are able to select one among them to attend. Schools' marginal gains from screening therefore depend on other schools' screenings and students' preferences. By focusing on the schools' screening choices (instead of the students' application decisions), we show how the competition for students between schools and colleges affect outcomes and students' welfare. We also show that, simply by observing which school a candidate attended, colleges can ``free-ride'' on the information produced by a fierce competition between schools for those students. Finally, we show that although colleges make full use of the information contained in the school a student attended, the extent to which students can improve the college that they are matched to by going to a (less desired) high-ranked school is fairly limited.

Keywords: Information transmission, College Admissions, Screening, Rankings

JEL Classification: C78, D61, D83

Suggested Citation

Bó, Inácio and Ko, Chiu Yu, Competitive Screening and Information Transmission (July 2017). Available at SSRN: https://ssrn.com/abstract=3009140

Inácio Bó (Contact Author)

WZB Berlin Social Science Center ( email )

Reichpietschufer 50
D-10785 Berlin, 10785
Germany

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

Chiu Yu Ko

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

HOME PAGE: http://sites.google.com/site/kochiuyu/

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