Correlation Neglect in Student-to-School Matching

28 Pages Posted: 13 Aug 2019 Last revised: 11 Oct 2019

See all articles by Alex Rees-Jones

Alex Rees-Jones

Cornell University - Department of Economics; National Bureau of Economic Research (NBER)

Ran I. Shorrer

Pennsylvania State University

Chloe Tergiman

The Pennsylvania State University

Date Written: August 8, 2019

Abstract

A growing body of evidence suggests that decision-makers fail to account for correlation in signals that they receive. We study the relevance of this mistake in students' interactions with school- choice matching mechanisms. In a lab experiment presenting simple and incentivized school-choice scenarios, we find that subjects tend to follow optimal application strategies when schools' admissions decisions are determined independently. However, when schools rely on a common priority — inducing correlation in their decisions — decision making suffers: application strategies become substantially more aggressive and fail to include attractive "safety" options. We document that this pattern holds even within-subject, with significant fractions of participants applying to different programs in mathematically equivalent situations that differ only by the presence of correlation. We provide a battery of tests suggesting that this phenomenon is at least partially driven by correlation neglect, and we discuss implications that arise for the design and deployment of student-to-school matching mechanisms.

Keywords: matching, correlation neglect, laboratory experiment

JEL Classification: C91, D01, D03, M21

Suggested Citation

Rees-Jones, Alex and Shorrer, Ran I. and Tergiman, Chloe, Correlation Neglect in Student-to-School Matching (August 8, 2019). Available at SSRN: https://ssrn.com/abstract=3434662 or http://dx.doi.org/10.2139/ssrn.3434662

Alex Rees-Jones (Contact Author)

Cornell University - Department of Economics ( email )

Ithaca, NY 14853
United States

HOME PAGE: http://www.alexreesjones.com

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ran I. Shorrer

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

Chloe Tergiman

The Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

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