The paper analyses the characteristics of the supply of higher education in different
geographical macroareas using a strategic interaction framework. It focuses on universities
operating in centralised funding system that autonomously set the quality of education
showing that in equilibrium it is inversely related to students' moving costs across areas. We
show that in the presence of asymmetric information about workers' ability and asymmetric
costs of moving, the only PBE consistent with forward induction involves that only high ability …