Hedging When Applying: Simultaneous Search with Correlation

S. Nageeb Ali and Ran I. Shorrer

American Economic Review, 2025, vol. 115, issue 2, 571-98

Abstract: Applicants to schools, colleges, and jobs hedge by applying to a broad range of options, including reaches, matches, and safeties. We develop a simultaneous-search framework that rationalizes this practice. In this framework, the admissions process is correlated across schools so that if an applicant is rejected by one school, she is more likely to be rejected by more selective schools. We find that an applicant then optimally targets both safeties and reaches. We characterize how the optimal portfolio varies with the applicant's beliefs, risk attitudes, and application costs and offer an algorithm that delivers the optimal portfolio in polynomial time.

JEL-codes: D81 D83 D91 I23 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/aer.20211137 (application/pdf)
https://www.aeaweb.org/doi/10.1257/aer.20211137.appx (application/pdf)
https://www.aeaweb.org/doi/10.1257/aer.20211137.slds (application/pdf)
https://www.aeaweb.org/doi/10.1257/aer.20211137.ds (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:115:y:2025:i:2:p:571-98

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/aer.20211137

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().