University admission: Is achievement a sufficient criterion?

We analyse university admissions using a statistical discrimination model where students differ by ability and social group. In this university system, candidates are evaluated on the basis of their expected human capital, which includes both their innate abilities and the knowledge acquired during their schooling. Consequently, students determine their study effort based on the behaviour of universities. Interestingly, we find that students from a less advantaged group need a lower grade to gain admission to the best universities. If a university cannot discriminate between social groups, all students with the same grade will attend universities of the same quality, but with different levels of human capital.