Working Paper: NBER ID: w30635
Authors: Bnaya Dreyfuss; Ofer Glicksohn; Ori Heffetz; Assaf Romm
Abstract: Can incorporating expectations-based-reference-dependence (EBRD) considerations reduce seemingly dominated choices in the Deferred Acceptance (DA) mechanism? We run two experiments (total N = 500) where participants are randomly assigned into one of four DA variants—{static, dynamic} × {student proposing, student receiving}—and play ten simulated large-market school-assignment problems. While a standard, reference-independent model predicts the same straightforward behavior across all problems and variants, a news-utility EBRD model predicts stark differences across variants and problems. As the EBRD model predicts, we find that (i) across variants, dynamic student receiving leads to significantly fewer deviations from straightforward behavior, (ii) across problems, deviations increase with competitiveness, and (iii) within specific problems, the specific deviations predicted by the EBRD model are indeed those commonly observed in the data.
Keywords: Deferred Acceptance; Expectations-based Reference Dependence; Behavioral Economics
JEL Codes: D47; D82; D84; D91
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| EBRD model (C51) | deviations from straightforward behavior (D91) |
| DA variant (Y10) | non-straightforward behavior (D91) |
| competitiveness (L13) | non-straightforward behavior (D91) |