Response to: ‘Signals, Educational Decision-Making, and Inequality’: a comment on the formal model by Holm, Hjorth-Trolle, and Jæger

Abstract In this rejoinder, we engage in the discussion raised by Yastrebov (2023) about the assumptions in the theoretical models in Holm et al. (2019) and how the implications of the theory are handled. Our original model proposes that students use signals about academic ability to make inferences about the costs and benefits of different educational options. In particular, we propose that when low-socioeconomic status (SES) student receives a negative information shock in high school, they are more likely to drop out than their high-SES counterparts, and this difference is more pronounced for high-grade point average (GPA) students than for low-GPA students. Here we show that this holds true, despite the arguments raised by Yastrebov (2023).