Working Paper: CEPR ID: DP7641
Authors: Eric Budish; Estelle Cantillon
Abstract: This paper uses data consisting of students' strategically reported preferences and their underlying true preferences to study the course allocation mechanism used at Harvard Business School. We show that the mechanism is manipulable in theory, manipulated in practice, and that these manipulations cause meaningful welfare losses. However, we also find that ex-ante welfare is higher than under the strategyproof and ex-post efficient alternative, the Random Serial Dictatorship. We trace the poor ex-ante performance of RSD to a phenomenon specific to multi-unit assignment, "callousness". We draw lessons for the design of multi-unit assignment mechanisms and for market design more broadly.
Keywords: course allocation; dictatorship; ex-ante efficiency; ex-post efficiency; field data; market design; multiunit assignment; random serial dictatorship; strategic behaviour; strategy-proofness
JEL Codes: C78; C93; D02
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| HBS mechanism (B00) | congestion (L91) |
| HBS mechanism (B00) | substantial inefficiency (D61) |
| strategic manipulation (C72) | congestion (L91) |
| strategic manipulation (C72) | substantial inefficiency (D61) |
| overreporting preferences (D91) | earlier runout times (C41) |
| strategic behavior (L21) | proportion of students receiving favorite course (A22) |
| strategic behavior (L21) | expected average rank of courses (A14) |
| HBS mechanism (B00) | ex-ante welfare (H53) |
| RSD (Y40) | ex-post efficiency (D61) |
| callousness (A13) | poor ex-ante performance of RSD (P27) |