Working Paper: NBER ID: w25096
Authors: Adam Kapor; Christopher A. Neilson; Seth D. Zimmerman
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.
Keywords: school choice; beliefs; deferred acceptance; welfare outcomes
JEL Codes: D47; I20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Families' subjective beliefs about admissions probabilities significantly deviate from rational expectations (D80) | strategic application mistakes (L21) |
| Assuming families have accurate beliefs (D83) | incorrect conclusion that switch to DA would reduce welfare (D69) |
| Switching from the baseline mechanism to a truthful reporting under a deferred acceptance mechanism (C78) | mean welfare (I30) |