Decision-Making under Information Asymmetry: How do Misinformation and Uncertainty Affect Tertiary Education Choices?

Abstract

Considering that tertiary education has become increasingly popular among young adults worldwide, this study analyses their choices between two different types of tertiary education. We focus on the unique case of Swiss vocational education and training (VET) graduates, who can choose between university education or professional education and training (PET) for tertiary education. However, such diversified educations systems are difficult for young adults to understand, as it requires them to be fully informed about the different educational options. We thus analyse VET graduates’ level of information about tertiary education in terms of their subjective assessment of their own knowledge as well as their objective knowledge about their eligibility for different educational types, and about graduate wages. We estimate the effect of these three variables on the likelihood of VET graduates choosing PET over university, conditional on a rich set of covariates. Our findings show that VET graduates’ information levels differ according to the type of tertiary education, and that misinformation about tertiary education wage benefits and uncertainty about eligibility, especially in terms of university education, influence their educational choice-making. Hence, to ensure individually optimal choices, it is crucial that young adults are provided information about all relevant options and aspects of different tertiary education types.