Perceived and actual option values of college enrollment

Yifan Gong, Todd Stinebrickner and Ralph Stinebrickner

Journal of Applied Econometrics, 2020, vol. 35, issue 7, 940-959

Abstract: An important feature of postsecondary schooling is the experimentation that accompanies sequential decision making. Specifically, by entering college, a student gains the option to decide at a future time whether it is optimal to remain in college or to drop out, after resolving uncertainty that existed at entrance about factors that affect the return to college. This paper uses data from the Berea Panel Study to quantify the value of this option. The unique nature of the data allows us to make a distinction between “actual” option values and “perceived” option values and to examine the accuracy of students' perceptions.

Date: 2020
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https://doi.org/10.1002/jae.2795

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Working Paper: Perceived and Actual Option Values of College Enrollment (2020)
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