This thesis studies what kind of strategic incentives a mechanism applied in Finnish college admissions in the fields of Business Administration and Economics (BAE) during 2015–2017 offers as well as how applicants respond to these incentives. A special type of a strategy that a student can only be hurt by and therefore strategically sophisticated students should try to avoid under the mechanism – referred to as the Priority Point Mechanism (PPM) – is characterised. Given this strategy, the thesis investigates whether the applicants’ behaviour is in line with some students responding to the incentives of the mechanism, and whether some students fail in responding to them.
Using data on BAE applicants’ full Rank Order Lists (ROLs) and applying a First Differences approach, hypotheses associated with studying strategic behaviour are tested. The results are in line with some students strategizing under PPM: the removal of the priority points increases the probability of ranking the most prestigious programme first by 5.2 percentage points (p<0.001), and for the most prestigious programmes pairs, it increases the probability of ranking programmes with small expected cut-off differences by 5.5–12.7 percentage points (p<0.01). However, out of three programme pairs studied, for one pair the estimated effect is 2.1 and insignificant (p≈0.11). There is no evidence in favour of these behavioural changes translating into longer ROLs: the estimate is 0.069 more study programmes ranked when priority points are removed, and it is insignificant (p≈0.34).
Students who fail in responding to the strategic incentives offered by PPM exist. During 2016 and 2017, 7–9 % of students submitted an ROL by which they could only be hurt, and in 2017, 2.8 % of students submitted an ROL which clearly demonstrates lack of strategic sophistication. Motivated by the result that students who make such mistakes exist, students who made a mistake are compared to those who didn’t. The results suggest that having more experience and lack of informational disadvantages don’t protect students from playing a strategy by which they can only be hurt, while these aspects seem to be negatively correlated with making a mistake that demonstrates lack of strategic sophistication. For both mistake types, making a mistake is associated with lower academic aptitudes.
The finding that students’ behaviour is in line with some applicants strategically behaving under PPM has implications on whether true preferences should be inferred from stated preferences if stated under a manipulable mechanism. Furthermore, some students strategically behaving and some students failing in responding to the incentives can result in unfair allocations where some students justifiably envy others. In addition, factors such as luck, risk taking attitudes, confidence, and difficulties in predicting entry-thresholds may contribute to who ends up being selected. Therefore, given the importance of college admissions on young students’ future prospects, how applicants respond to the incentives of the mechanism applied and how that in turn impacts the fairness of the resulting allocation of students to colleges remain questions which deserve more research
