Abstract
When participating in school choice, students may incur information acquisition costs to learn about school quality. This paper investigates how two popular school choice mechanisms, the (Boston) Immediate Acceptance and the Deferred Acceptance, incentivize students’ information acquisition. Specifically, we show that only the Immediate Acceptance mechanism incentivizes students to learn their own cardinal and others’ preferences. We demonstrate that information acquisition costs affect the efficiency of each mechanism and the welfare ranking between the two. In the case where everyone has the same ordinal preferences, we evaluate the welfare effects of various information provision policies by education authorities.
Highlights
When choosing a school, students often have imperfect information on their own preferences over candidate schools, partly because it is difficult to assess the potential educational outcomes for each school (Dustan et al 2015)
We demonstrate that information acquisition costs affect the efficiency of each mechanism and the welfare ranking between the two
We focus on two mechanisms popular in both research literature and practice: the Boston Immediate Acceptance and the Gale-Shapley Deferred Acceptance mechanism
Summary
Students often have imperfect information on their own preferences over candidate schools, partly because it is difficult to assess the potential educational outcomes for each school (Dustan et al 2015). As the cost of acquiring information on own preferences increases, the welfare advantage of IA diminishes to zero in the first example, while the welfare ranking between the two mechanisms flips in the second example for some cost configurations Extending these findings, our second contribution is to present some implications for the design of information provision policies. Relative to the case with cardinal preferences being private information, there is a loss in (ex ante) student welfare evaluated before the realization of each student’s type We illustrate this welfare loss in an example with three students and three schools, {s1, s2, s3}, with the details in “Appendix A.5.5”.
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