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  3. American Economic Review
  4. May 2020
  5. Heterogeneous Beliefs and School Choice Mechanisms

Heterogeneous Beliefs and School Choice Mechanisms

  • Adam J. Kapor
  • Christopher A. Neilson
  • Seth D. Zimmerman
American Economic Review
vol. 110, no. 5, May 2020
(pp. 1274-1315)
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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.

Citation

Kapor, Adam J., Christopher A. Neilson, and Seth D. Zimmerman. 2020. "Heterogeneous Beliefs and School Choice Mechanisms." American Economic Review, 110 (5): 1274-1315. DOI: 10.1257/aer.20170129

Additional Materials

JEL Classification

  • D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
  • H75 State and Local Government: Health; Education; Welfare; Public Pensions
  • I21 Analysis of Education
  • I28 Education: Government Policy