Estonia Black

Job market paper

School Selectivity Decisions and Discrimination

I develop a model of a profit-maximizing school which designs an admissions test and sets tuition in an environment where the value of an education (to a potential student) is a function of the information carried by their admissions status. I then apply the basic structure of that model to investigate the school’s incentive to apply discrimination or affirmative action when workers are characterized by a notion of diversity which is correlated with ability to pay tuition but uncorrelated with labor market productivity. I show how the school may optimally discriminate in admissions or pricing under various restrictions on discrimination.