How Universities Can Cooperate to Ehance the Welfare of their Graduates in the Labour Market

Ostrovsky and Schwarz (NBER, 2008) demonstrate that if universities disclose the benchmark amount of information (parchment), students and employers will not find it profitable to contract early; if the universities disclose more information, unraveling will occur.

Holt and Roth (PNAS, 2004) have already suggested how to avoid prisoner’s dilemma problems of timing in labour markets - by designing a clearinghouse in which employers and job candidates can both participate.

One of the principal concerns here is that early contracting may deter students from working hard in the later stages of their courses, which could ultimately have negative consequences once they move on from their initial conditions in the graduate labour market.