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A Noisy Screening Model of Education

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  • Pedro Landeras
  • J. M. Pérez de Villarreal

Abstract

. This paper presents a screening model of education in which students having private information about their innate abilities are noisily tested in school. The aim is to explore the effect of noise on the screening equilibrium. By assuming that labour contracts take the form of reward schedules based on inaccurate academic qualifications, one can show that separating equilibrium turns out to be unique but insufficiently revealing, and both high and low ability types become overeducated. Also, even when separation is uncompleted, we show that a firm could still profitably cream‐skim the market so that no pooling equilibrium exits. As in the non‐noise case, the existence of an equilibrium is assured when the student population is made up mainly of a small proportion of high‐ability individuals, but in that case the fraction required is even lower.

Suggested Citation

  • Pedro Landeras & J. M. Pérez de Villarreal, 2005. "A Noisy Screening Model of Education," LABOUR, CEIS, vol. 19(1), pages 35-54, March.
    • Handle: RePEc:bla:labour:v:19:y:2005:i:1:p:35-54
    DOI: 10.1111/j.1467-9914.2005.00297.x
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    References listed on IDEAS

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    1. De Fraja, Gianni & Landeras, Pedro, 2006. "Could do better: The effectiveness of incentives and competition in schools," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 189-213, January.
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    Cited by:

    1. Berliant, Marcus & Kung, Fan-chin, 2006. "Can Information Asymmetry Cause Agglomeration?," MPRA Paper 1278, University Library of Munich, Germany, revised 29 Dec 2006.
    2. Andreas Haupt & Dylan Hadfield-Menell & Chara Podimata, 2023. "Recommending to Strategic Users," Papers 2302.06559, arXiv.org.
    3. Berliant, Marcus & Kung, Fan-chin, 2010. "Can information asymmetry cause stratification?," Regional Science and Urban Economics, Elsevier, vol. 40(4), pages 196-209, July.
    4. de Haan, Thomas & Offerman, Theo & Sloof, Randolph, 2011. "Noisy signaling: Theory and experiment," Games and Economic Behavior, Elsevier, vol. 73(2), pages 402-428.
    5. Tsakas, Elias & Tsakas, Nikolas, 2021. "Noisy persuasion," Games and Economic Behavior, Elsevier, vol. 130(C), pages 44-61.
    6. David Touahri, 2009. "Capital humain, risques et effets de signal," Working Papers halshs-00414277, HAL.

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