School Choice and Loss Aversion

Vincent Meisner and Jonas von Wangenheim

No 9479, CESifo Working Paper Series from CESifo

Abstract: Evidence suggests that participants in direct student-proposing deferred-acceptance mechanisms (DA) play dominated strategies. To explain the data, we introduce expectation-based loss aversion into a school-choice setting and characterize choice-acclimating personal equilibria in DA. We find that non-truthful preference submissions can be strictly optimal if and only if they are top-choice monotone. In equilibrium, DA may implement allocations with justified envy. Specifically, it discriminates against students who are more loss averse or less confident than their peers, and amplifies already existing discrimination. To level the playing field, we propose sequential mechanisms as alternatives that are robust to these biases.

Keywords: market design; matching; school choice; reference-dependent preferences; loss aversion; deferred acceptance (search for similar items in EconPapers)
JEL-codes: C78 D47 D78 D81 D82 D91 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cbe, nep-des, nep-exp, nep-mic, nep-upt and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: School Choice and Loss Aversion (2021)
Working Paper: School Choice and Loss Aversion (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9479

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