513 research outputs found
Gaming the Boston School Choice Mechanism in Beijing
The Boston mechanism is criticized for its poor incentive and welfare performance compared
to the Gale-Shapley deferred-acceptance mechanism (DA). Using school choice data
from Beijing, I investigate parents’ behavior under the Boston mechanism, taking into account
parents’ possible mistakes when they strategize. Evidence shows that parents are
overcautious as they play "safe" strategies too often. Wealthier/more educated parents are
less overcautious and perform slightly better because they have better outside options while
not being any more adept at strategizing. Parents who are always truth-telling experience
a utility gain in switching from the Boston mechanism to the DA, equivalent to a 7.1% decrease
in the distance to a school. Among them, 44.2% are better off under the DA, while
35.5% are worse off
Gaming the Boston School Choice Mechanism in Beijing
The Boston mechanism has been criticized for its poor incentive and welfare performance compared with the deferred-acceptance mechanism (DA). Using school choice data from Beijing where the Boston mechanism without school priorities is adopted, I investigate parents' behavior and allow for possible mistakes. Evidence shows that parents are overcautious because they play ``safe'' strategies too often. There is no evidence that wealthier/more-educated parents are more adept at strategizing. If others behave as indicated in the data, an average naive parent who always reports her true preferences experiences a utility loss in switching from the Boston to the DA mechanism (equivalent to random serial dictatorship in this setting), corresponding to an 8% increase in the distance from home to school or substituting a 13% chance at the best school with an equal chance at the second-best school. She has a 27% (55%) chance of being better (worse) off. If parents are instead either sophisticated (they always play a best response against others) or naive, the results are mixed: under DA, naive parents enjoy a utility gain on average when less than 80% of the population is naive, while still about 42% are worse off and only 39% are better off. Sophisticated parents always lose more
Application Costs and Congestion in Matching Markets
A matching market often requires recruiting agents, or ``programs,'' to costly screen ``applicants,'' and congestion increases with the number of applicants to be screened. We investigate the role of application costs: Higher costs reduce congestion by discouraging applicants from applying to certain programs; however, they may harm match quality. In a multiple-elicitation experiment conducted in a real-life matching market, we implement variants of the Gale-Shapley Deferred-Acceptance mechanism with different application costs. Our experimental and structural estimates show that a (low) application cost effectively reduces congestion without harming match quality
Competitive Equilibrium from Equal Incomes for Two-Sided Matching
Competitive Equilibrium from Equal Incomes for Two-Sided Matching
Using the assignment of students to schools as our leading example, we study many-to-one
two-sided matching markets without transfers. Students are endowed with cardinal preferences
and schools with ordinal ones, while preferences of both sides need not be strict. Using the
idea of a competitive equilibrium from equal incomes (CEEI, Hylland and Zeckhauser (1979)),
we propose a new mechanism, the Generalized CEEI, in which students face different prices
depending on how schools rank them. It always produces fair (justified-envy-free) and ex ante
e¢ cient random assignments and stable deterministic assignments if both students and schools
are truth-telling. We show that each student's incentive to misreport vanishes when the market
becomes large, given all others are truthful. The mechanism is particularly relevant to school
choice as schools' priority orderings over students are usually known and can be considered
as their ordinal preferences. More importantly, in settings like school choice where agents have
similar ordinal preferences, the mechanismis explicit use of cardinal preferences may significantly
improve eficiency. We also discuss its application in school choice with group-specific quotas
and in one-sided matching
Beyond Truth-Telling: Preference Estimation with Centralized School Choice and College Admissions
We propose novel approaches and tests for estimating student preferences with data from centralized matching mechanisms, like the Gale-Shapley Deferred Acceptance, when students are strictly ranked by, e.g., test scores. Without requiring truth-telling to be the unique equilibrium, we show that the matching is (asymptotically) stable, or justified-envy-free, implying that every student is matched with her favorite school/college among those she is qualified for ex post. Having illustrated the approaches in simulations, we apply them to school choice data from Paris and demonstrate evidence supporting stability but not truth-telling. We discuss when each approach is more appropriate in real-life settings
Hurting without Hitting: The Economic Cost of Political Tension
Political tension causing diplomatic strains rarely escalates into direct violence or war. This paper identifies the economic effects of such non-violent political tension by examining Taiwan’s sovereignty debate. Non-violent events harming the relationship with mainland China lead to an average daily drop of 200 basis points in Taiwanese stock returns. The impact is more severe on firms openly supporting the Taiwanese pro-independence party. Through a series of tests we identify this economic penalty as initiated by mainland authorities, who specifically target political opponents that are economically exposed to mainland China via either investments or exports
Decentralizing Centralized Matching Markets: Implications from Early Offers in University Admissions
The matching literature often recommends market centralization under the
assumption that agents know their own preferences and that their preferences
are fixed. We find counterevidence to this assumption in a quasi-experiment. In
Germany's university admissions, a clearinghouse implements the early stages of
the Gale-Shapley algorithm in real time. We show that early offers made in this
decentralized phase, although not more desirable, are accepted more often than
later ones. These results, together with survey evidence and a theoretical
model, are consistent with students' costly learning about universities. We
propose a hybrid mechanism to combine the advantages of decentralization and
centralization
Identification and Estimation in Many-to-one Two-sided Matching without Transfers
In a setting of many-to-one two-sided matching with non-transferable
utilities, e.g., college admissions, we study conditions under which
preferences of both sides are identified with data on one single market.
Regardless of whether the market is centralized or decentralized, assuming that
the observed matching is stable, we show nonparametric identification of
preferences of both sides under certain exclusion restrictions. To take our
results to the data, we use Monte Carlo simulations to evaluate different
estimators, including the ones that are directly constructed from the
identification. We find that a parametric Bayesian approach with a Gibbs
sampler works well in realistically sized problems. Finally, we illustrate our
methodology in decentralized admissions to public and private schools in Chile
and conduct a counterfactual analysis of an affirmative action policy
Beyond Truth-Telling: Preference Estimation with Centralized School Choice and College Admissions
We propose novel approaches and tests for estimating student preferences with data from centralized matching mechanisms, like the Gale-Shapley Deferred Acceptance, when students are strictly ranked by, e.g., test scores. Without requiring truth-telling to be the unique equilibrium, we show that the matching is (asymptotically) stable, or justified-envy-free, implying that every student is matched with her favorite school/college among those she is qualified for ex post. Having illustrated the approaches in simulations, we apply them to school choice data from Paris and demonstrate evidence supporting stability but not truth-telling. We discuss when each approach is more appropriate in real-life settings
Gaming the Boston School Choice Mechanism in Beijing
The Boston mechanism is criticized for its poor incentive and welfare performance compared\ud
to the Gale-Shapley deferred-acceptance mechanism (DA). Using school choice data\ud
from Beijing, I investigate parents’ behavior under the Boston mechanism, taking into account\ud
parents’ possible mistakes when they strategize. Evidence shows that parents are\ud
overcautious as they play "safe" strategies too often. Wealthier/more educated parents are\ud
less overcautious and perform slightly better because they have better outside options while\ud
not being any more adept at strategizing. Parents who are always truth-telling experience\ud
a utility gain in switching from the Boston mechanism to the DA, equivalent to a 7.1% decrease\ud
in the distance to a school. Among them, 44.2% are better off under the DA, while\ud
35.5% are worse off
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