A Signaling Model of University Selection

We propose a signaling model of student enrollment dynamics based on probabilities of completion of studies, under different rationality assumptions. There are two types of students and two schools. School of graduation serves as a signal of student productivity to prospective employers. The benchmark case is when both students and employers are rational. We, then, relax rationality assumptions and show that, while intermediate dynamics becomes more complex, possible long run equilibria stay essentially the same. Importantly, comparative statics can be quite surprising and differ significantly from the full rationality case.