Sunday, March 22, 2020

School choice without the assumption of full-information equilibrium by Kapor, Neilson and Zimmerman

Forthcoming in the AER:

Heterogeneous Beliefs and School Choice Mechanisms By Adam J. Kapor and Christopher A. Neilson and Seth D. Zimmerman

Abstract: This paper studies how welfare outcomes in centralized school choice depend on the assignment mechanism when participants are not fully informed. Using a survey of school choice participants in a strategic setting, we show that beliefs about admissions chances differ from rational expectations values and predict choice behavior. To quantify the welfare costs of belief errors, we estimate a model of school choice that incorporates subjective beliefs. We evaluate the equilibrium effects of switching to a strategy-proof deferred acceptance algorithm, and of improving households’ belief accuracy. We find that a switch to truthful reporting in the DA mechanism offers welfare improvements over the baseline given the belief errors we observe in the data, but that an analyst who assumed families had accurate beliefs would have reached the opposite conclusion.

see my earlier post:

Monday, January 28, 2019

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