Efficient Tuition Fees and Examinations

Robert Gary-Bobo () and Alain Trannoy

Journal of the European Economic Association, 2008, vol. 6, issue 6, 1211-1243

Abstract: We assume that students observe only a private, noisy signal of their ability and that universities can condition admission decisions on the results of noisy tests. If the university observes a private signal of each student's ability, which is soft information, then asymmetries of information are two-sided, and the optimal admission policy involves a mix of pricing and pre-entry selection, based on the university's private information. In contrast, if all test results are public knowledge, then there is no sorting on the basis of test scores: Tuition alone does the job of implementing an optimal degree of student self-selection. These results do not depend on the existence of peer effects. The optimal tuition follows a classic marginal social-cost pricing rule. (JEL: D82, H42, I22, J24) (c) 2008 by the European Economic Association.

JEL-codes: D82 H42 I22 J24 (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (41)

Downloads: (external link)
http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1542-4774/issues link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:jeurec:v:6:y:2008:i:6:p:1211-1243

Access Statistics for this article

Journal of the European Economic Association is currently edited by Xavier Vives, George-Marios Angeletos, Orazio P. Attanasio, Fabio Canova and Roberto Perotti

More articles in Journal of the European Economic Association from MIT Press
Bibliographic data for series maintained by The MIT Press ().