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The instability of matching with overconfident agents

Siqi Pan

Games and Economic Behavior, 2019, vol. 113, issue C, 396-415

Abstract: Many centralized college admissions markets allocate seats to students based on their performance on a single standardized exam. The exam's measurement error can cause the exam-derived priorities to deviate from colleges' aptitude-based preferences. Previous literature proposes to combine pre-exam preference submission with a Boston algorithm (a PreExam-BOS mechanism). This paper examines the proposed mechanism in an experiment where students are not fully informed of their relative aptitudes. The results show pre-exam preference submission is distorted by overconfidence and PreExam-BOS fails to achieve stable matching with respect to aptitudes. Compared to a post-score Serial Dictatorship mechanism, which is robust to overconfidence but more prone to the exam's measurement error, PreExam-BOS creates more mismatches and a greater variance in the extent of mismatches: some students receive a large advantage while others are hurt considerably. Moreover, PreExam-BOS rewards overconfidence and punishes underconfidence. The observed overconfidence cannot be mitigated with an improved information condition.

Keywords: School choice matching; College admission; Overconfidence; Gender (search for similar items in EconPapers)
JEL-codes: C78 C92 I28 D91 J16 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:gamebe:v:113:y:2019:i:c:p:396-415