30 Pages Posted: 7 Apr 2005
Date Written: October 2004
When candidates from two groups compete for admission to college, we show that a college maximizes the test scores of its incoming class by adopting an admissions rule that favors the weaker group. Such "handicapping" of the weaker group increases competition and induces both groups to invest more in educational attainment. When the weaker group is in the minority, these results reconcile the often assumed conflicts between diversity and academic quality. While both groups invest more, we find that the stronger group responds to affirmative action more aggressively than the weaker group, which tends to widen the intergroup test score gap.
Keywords: Affirmative Action, College Admissions, All-Pay Auction, Incentive
JEL Classification: H0, J7
Suggested Citation: Suggested Citation