NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Heterogeneous Beliefs and School Choice Mechanisms

Adam Kapor, Christopher A. Neilson, Seth D. Zimmerman

NBER Working Paper No. 25096
Issued in September 2018, Revised in August 2019
NBER Program(s):Economics of Education Program, Industrial Organization Program

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.

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Document Object Identifier (DOI): 10.3386/w25096

 
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