Dominated choices under deferred acceptance mechanism: The effect of admission selectivity

Abstract

College applicants often make dominated choices even when a strategically simple mechanism such as deferred acceptance is in place. We study Hungarian college admissions, where deferred acceptance is used, and still many college applicants make revealed dominated choices: they forgo the free opportunity to receive a tuition waiver. Using two empirical strategies, we show that when admission with a tuition waiver becomes more selective, applicants make more revealed dominated choices. Our results suggest that dominated choices respond to economic incentives.