We assume that students can acquire a wage premium, thanks to studies, and form a rational expectation of their future … earnings, which depends on personal ability. Students receive a private, noisy signal of their ability, and universities can … of test scores. Students optimally self-select as a result of pricing only. If capital markets are perfect but …

We assume that students can acquire a wage premium, thanks to studies, and form a rational expectation of their future … earnings, which depends on personal "ability". Students receive a private, noisy signal of their ability, and universities can … of test scores. Students optimally self-select as a result of pricing only. If capital markets are perfect but …

Student loans, even income-contingent ones, are not optimal. Potential university students with the appropriate … on the choice of university degree, but students with a natural aptitude for studies that do not hold the prospect of a …

Student loans, even income-contingent ones, are not optimal. Potential university students with the appropriate … on the choice of university degree, but students with a natural aptitude for studies that do not hold the prospect of a …

optimal allocation is readily achievable. The decentralized linear-subsidy case produces an externality that reduces joint …, tuition maximizes joint surplus. Specifications differ in the subsidy's assigned role, which varies from affecting tuition …