Australasian Microeconomic Theory Seminar - Vincent Meisner (TU Berlin)

More Information

Alexandru Nichifor

nichifor@unimelb.edu.au

T: +61383447420

Title: School Choice and Loss Aversion

Abstract: Extensive evidence suggests that participants in the direct student-proposing deferred-acceptance mechanism (DSPDA) play dominated strategies. In particular, students with low priority tend to misrepresent their preferences for popular schools. To explain the observed data, we introduce expectation-based loss aversion into a school-choice setting and characterize choice-acclimating personal equilibria in DSPDA. Truthful equilibria can fail to exist, and DSPDA might implement unstable and more inefficient allocations in both small and large markets. Specifically, it discriminates against students who are more loss averse or less overconfident than their peers, and amplifies already existing (or perceived) discrimination. To level the playing field, we propose serial dictatorship mechanisms as a strategy proof and stable alternative that is robust to these biases.

We kindly invite anyone else who might be interested to attend to register once by joining the AMETS mailing list. All those registered will receive an announcement and a reminder before each talk, together with a (password protected) randomly generated Zoom link.