Demand Analysis Using Strategic Reports: An Application to a School Choice Mechanism

64 Pages Posted: 22 Dec 2014 Last revised: 8 Apr 2022

See all articles by Nikhil Agarwal

Nikhil Agarwal

Massachusetts Institute of Technology (MIT) - Department of Economics; Yale University - Cowles Foundation

Paulo Somaini

Stanford University - Department of Economics

Date Written: December 2014

Abstract

Several school districts use assignment systems that give students an incentive to misrepresent their preferences. We find evidence consistent with strategic behavior in Cambridge. Such strategizing can complicate preference analysis. This paper develops empirical methods for studying random utility models in a new and large class of school choice mechanisms. We show that preferences are non-parametrically identified under either sufficient variation in choice environments or a preference shifter. We then develop a tractable estimation procedure and apply it to Cambridge. Estimates suggest that while 82% of students are assigned to their stated first choice, only 72% are assigned to their true first choice because students avoid ranking competitive schools. Assuming that students behave optimally, the Immediate Acceptance mechanism is preferred by the average student to the Deferred Acceptance mechanism by an equivalent of 0.08 miles. The estimated difference is smaller if beliefs are biased, and reversed if students report truthfully.

Suggested Citation

Agarwal, Nikhil and Somaini, Paulo, Demand Analysis Using Strategic Reports: An Application to a School Choice Mechanism (December 2014). NBER Working Paper No. w20775, Available at SSRN: https://ssrn.com/abstract=2541551

Nikhil Agarwal (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Paulo Somaini

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

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