Lotteries in student assignment: An equivalence result

This paper formally examines two competing methods of conducting a lottery in assigning students to schools, motivated by the design of the centralized high school student assignment system in New York City. The main result of the paper is that a single and multiple lottery mechanism are equivalent for the problem of allocating students to schools in which students have strict preferences and the schools are indifferent. In proving this result, a new approach is introduced, that simplifies and unifies all the known equivalence results in the house allocation literature. Along the way, two new mechanisms---Partitioned Random Priority and Partitioned Random Endowment---are introduced for the house allocation problem. These mechanisms generalize widely studied mechanisms for the house allocation problem and may be appropriate for the many-to-one setting such as the school choice problem.Matching, random assignment

Short Interest and Stock Returns

Using a longer time period and both NYSE-Amex and Nasdaq stocks, this paper examines short interest and stock returns in more detail than any previous study and finds that many documented patterns are not robust. While equally weighted high short interest portfolios generally underperform, value weighted portfolios do not. In addition, there is a negative correlation between market returns and short interest over our whole period. Finally, inferences from short time periods, such as 1988-1994 when the underperformance of high short interest stocks was exceptional or 1995-2002, when high short interest Nasdaq stocks did not underperform, are misleading.

Speculative Attacks and Risk Management

The paper builds a simple, micro-founded model of exchange rate management, spec-ulative attacks, and exchange rate determination. The country may defend a peg in an attempt to signal a strong currency and thereby boost the government’s future re-election prospects or attract foreign capital. The paper relates the size of the speculative attack and government’s defense strategy to the market’s prior beliefs about the strength of the currency, the ability of foreign speculators to short sell the currency, domestic politics, and initial debt composition. Speculative activities can exhibit strategic complementarity or sub-stitutability. Finally, features of original sin covary with the maintenance of pegs, as letting residents hedge the currency or incentivizing them to lengthen their debt maturity structure is an admission that the currency is overvalued and undoes the signal sent by defending the currency

Lotteries in Student Assignment: An Equivalence Result

This paper formally examines two competing methods of conducting a lottery in assigning students to schools, motivated by the design of the centralized high school student assignment system in New York City. The main result of the paper is that a single and multiple lottery mechanism are equivalent for the problem of allocating students to schools in which students have strict preferences and the schools are indifferent. In proving this result, a new approach is introduced, that simplifies and unifies all the known equivalence results in the house allocation literature. Along the way, two new mechanisms — Partitioned Random Priority and Partitioned Random Endowment — are introduced for the house allocation problem. These mechanisms generalize widely studied mechanisms for the house allocation problem and may be appropriate for the many-to-one setting such as the school choice problem.

School Admissions Reform in Chicago and England: Comparing Mechanisms by Their Vulnerability to Manipulation

In Fall 2009, officials from Chicago Public Schools changed their assignment mechanism for coveted spots at selective college preparatory high schools midstream. After asking about 14,000 applicants to submit their preferences for schools under one mechanism, the district asked them re-submit their preferences under a new mechanism. Officials were concerned that "high-scoring kids were being rejected simply because of the order in which they listed their college prep preferences" under the abandoned mechanism. What is somewhat puzzling is that the new mechanism is also manipulable. This paper introduces a method to compare mechanisms based on their vulnerability to manipulation. Under our notion, the old mechanism is more manipulable than the new Chicago mechanism. Indeed, the old Chicago mechanism is at least as manipulable as any other plausible mechanism. A number of similar transitions between mechanisms took place in England after the widely popular Boston mechanism was ruled illegal in 2007. Our approach provides support for these and other recent policy changes involving matching mechanisms.

The New York City High School Match

Economic

The Costs of Free Entry: An Empirical Study of Real Estate Agents in Greater Boston

This paper studies the real estate brokerage industry in Greater Boston, an industry with low entry barriers and substantial turnover. Using a comprehensive dataset of agents and transactions from 1998-2007, we find that entry does not increase sales probabilities or reduce the time it takes for properties to sell, decreases the market share of experienced agents, and leads to a reduction in average service quality. These empirical patterns motivate an econometric model of the dynamic optimizing behavior of agents that serves as the foundation for simulating counterfactual market structures. A one-half reduction in the commission rate leads to a 73% increase in the number of houses each agent sells and benefits consumers by about $2 billion. House price appreciation in the first half of the 2000s accounts for 24% of overall entry and a 31% decline in the number of houses sold by each agent. Low cost programs that provide information about past agent performance have the potential to increase overall productivity and generate significant social savings.