Heterogeneous Beliefs and School Choice Mechanisms

54 Pages Posted: 1 Oct 2018

See all articles by Adam Kapor

Adam Kapor

Princeton University

Christopher Neilson

New York University (NYU) - Leonard N. Stern School of Business; Princeton University - Woodrow Wilson School of Public and International Affairs

Seth D. Zimmerman

Yale University; University of Chicago - Booth School of Business

Date Written: September 2018

Abstract

This paper studies how welfare outcomes in centralized school choice depend on the assignment mechanism when participants are not fully informed. Using a survey of school choice participants in a strategic setting, we show that beliefs about admissions chances differ from rational expectations values and predict choice behavior. To quantify the welfare costs of belief errors, we estimate a model of school choice that incorporates subjective beliefs. We evaluate the equilibrium effects of switching to a strategy-proof deferred acceptance algorithm, and of improving households’ belief accuracy. We find that a switch to truthful reporting in the DA mechanism offers welfare improvements over the baseline given the belief errors we observe in the data, but that an analyst who assumed families had accurate beliefs would have reached the opposite conclusion.

Suggested Citation

Kapor, Adam and Neilson, Christopher and Zimmerman, Seth D., Heterogeneous Beliefs and School Choice Mechanisms (September 2018). NBER Working Paper No. w25096, Available at SSRN: https://ssrn.com/abstract=3258193

Adam Kapor (Contact Author)

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

Christopher Neilson

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

Seth D. Zimmerman

Yale University ( email )

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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