Managing Quality in Higher Education Systems via Minimal Quality Requirements: Signaling and Control

This paper analyzes the strategic calculations of an academic program when setting minimal quality requirements for applicants as an issue in planning a signaling strategy under certain structural conditions, such as a rapid growth of a higher education system. We present two versions of a signaling game between an academic program/institution, as the informed player, and a governmental controlling body that has incomplete information about the program's quality. One version describes a situation where there is low sensitivity to quality variations in the system and the second where there is high sensitivity to quality. Analysis shows that governmental controlling bodies can affect the quality of the system by influencing the sensitivity to quality rather than by direct and tight control over academic institutions. Given a certain level of sensitivity, the impact of these bodies on outcomes is minimal so their intervention in the market can be limited as well.