School Choice and Loss Aversion

Arbeitspapier

Evidence suggests that participants in direct student-proposing deferred-acceptance mechanisms (DA) play dominated strategies. To explain the data, we introduce expectation-based loss aversion into a school-choice setting and characterize choice-acclimating personal equilibria in DA. We find that non-truthful preference submissions can be strictly optimal if and only if they are top-choice monotone. In equilibrium, DA may implement allocations with justified envy. Specifically, it discriminates against students who are more loss averse or less confident than their peers, and amplifies already existing discrimination. To level the playing field, we propose sequential mechanisms as alternatives that are robust to these biases.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9479

Classification and Topics

• Classification: Wirtschaft ; Bargaining Theory; Matching Theory ; Market Design ; Positive Analysis of Policy Formulation and Implementation ; Criteria for Decision-Making under Risk and Uncertainty ; Asymmetric and Private Information; Mechanism Design ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡
• Subject: market design ; matching ; school choice ; reference-dependent preferences ; loss aversion ; deferred acceptance

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Meisner, Vincent ; von Wangenheim, Jonas
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/249024
• Last update: 10.03.2025, 11:43 AM CET