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

Group Versus Individual Decision-Making: Is there a shift?

We revisit the phenomenon that group decisions differ systematically from decisions of individuals. Our experiment solicits individual and group decisions from the same subjects in two settings, gift-exchange games and lottery choices. With no deliberation and voting, the group decision is determined by the median individual decision, without a shift. With deliberation but no imposed decision rule, the individual one po- sition towards the selfish direction also becomes influential. In lottery choices we find no group shift relative to the median. We demonstrate that the standard practice of comparing means of group and individual decisions would incorrectly identify a level shift.Decision making, lottery, risky choices

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

In Fall 2009, officials from Chicago Public Schools abandoned 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 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 allocation mechanisms.National Science Foundation (U.S.

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.

Changing the Boston School Choice Mechanism

In July 2005 the Boston School Committee voted to replace the existing Boston school choice mechanism with a deferred acceptance mechanism that simplifies the strategic choices facing parents. This paper presents the empirical case against the previous Boston mechanism, a priority matching mechanism, and the case in favor of the change to a strategy-proof mechanism. Using detailed records on student choices and assignments, we present evidence both of sophisticated strategic behavior among some parents, and of unsophisticated strategic behavior by others. We find evidence that some parents pay close attention to the capacity constraints of different schools, while others appear not to. In particular, we show that many unassigned students could have been assigned to one of their stated choices with a different strategy under the current mechanism. This interaction between sophisticated and unsophisticated players identifies a new rationale for strategy-proof mechanisms based on fairness, and was a critical argument in Boston's decision to change the mechanism. We then discuss the considerations that led to the adoption of a deferred acceptance mechanism as opposed to the (also strategy-proof) top trading cycles mechanism.

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