JUMPING THE CURSE: EARLY CONTRACTING WITH PRIVATE INFORMATION IN UNIVERSITY ADMISSIONS

Sam-Ho Lee

International Economic Review, 2009, vol. 50, issue 1, pages 1-38

Abstract: This article introduces a new model of early contracting. Employers who have private information about the applicant's ability worry that applicants who accept their offer are precisely those who were not offered other jobs. To avoid this winner's curse, employers anticipate the time of contracting. The model is developed in the context of university admissions, and is shown to be consistent with several stylized facts in that "market." We show that, in contrast to received wisdom, allocative efficiency may be improved by the presence of early contracting. Copyright © (2009) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 2009
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