Reversing Reserves

34 Pages Posted: 13 Apr 2020 Last revised: 4 Sep 2022

See all articles by Parag A. Pathak

Parag A. Pathak

Massachusetts Institute of Technology (MIT) - Department of Economics

Alex Rees-Jones

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

Tayfun Sonmez

Boston College

Date Written: April 2020

Abstract

Affirmative action policies are often implemented through reserve systems. In this study, we demonstrate that reserve systems face widespread misunderstanding by the public. This misunderstanding can lead individuals to support policies that ineffectively pursue their interests. To establish these claims, we present 1,013 participants in the Understanding America Study with choices between pairs of reserve systems. Participants are members of the group receiving affirmative action and are financially incentivized to choose the system that maximizes their chance of admission. Using this data, we apply a novel approach to identifying the rate of uptake of different decision rules used by participants. We find that participants rarely use a fully optimal decision rule. In contrast, we find that many choices—40% in our primary estimates—are rationalized by a nearly correct decision rule, with errors driven solely by failing to appreciate the importance of processing order. Failing to account for processing order causes individuals to fail to distinguish between two policies that achieve different degrees of affirmative action: policies that provide non-binding minimum guarantees of the number of spaces allocated and policies that provide spaces over-and-above what would be allocated absent a reserve. Confusion about the importance of processing order helps to explain otherwise surprising decisions made in field applications of reserve systems. We discuss implications for managers and policy makers who are trying to implement reserve systems and who are accountable to the public.

Suggested Citation

Pathak, Parag A. and Rees-Jones, Alex and Sonmez, Tayfun, Reversing Reserves (April 2020). NBER Working Paper No. w26963, Available at SSRN: https://ssrn.com/abstract=3574428

Parag A. Pathak (Contact Author)

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

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

Alex Rees-Jones

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

Tayfun Sonmez

Boston College ( email )

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