Obvious Mistakes in a Strategically Simple College Admissions Environment

Abstract

In a centralized marketplace that was designed to be simple, we identify participants whose choices are dominated. Using administrative data from Hungary, we show that college applicants make obvious mistakes: they forgo the free opportunity to receive a tuition waiver worth thousands of dollars. At least 10 percent of the applicants made such mistakes in 2013. Costly mistakes have externalities: they transfer tuition waivers from high-to low-socioeconomic status students, and increase the number of students attending college. To shed light on the mechanisms underlying mistakes, we exploit a reform that substantially increased the selectivity of admission with financial aid in some fields of study. Increased admission selectivity raises the likelihood of making obvious mistakes, especially among high-socioeconomic status and low-achieving applicants.Our results suggest that mistakes are more common when their expected cost is lower. Still, the average cost of a mistake in 2013 was 114-365 dollars.

An experimental investigation of preference misrepresentation in the residency match

“…Prior work examining unincentivized assessments of truth-telling status ( 11 ) or a subclass of egregious mistakes ( 12 , 13 ) has provided evidence that students with better grades are less likely to misrepresent their preferences. We replicate this finding with our incentivized experimental measure.…”

Marketplaces, Markets, and Market Design

“…This is of course different from an empirical statement that students' submitted preferences always reflect their true preferences, and recently there has been a stream of work on this, much of it taking flight from Li (2017) on the distinction between strategy-proof and "obviously strategy-proof" mechanisms. Stable matching mechanisms are not obviously strategy-proof (Ashlagi and Gonczarowski 2016), and recent empirical work has focused on identifying cases in which some submitted preferences can be identified as departing from the likely underlying preferences, see, e.g., Rees-Jones (2017, Rees-Jones and Skowronek (2018), Hassidim et al (2017), and Shorrer and Sóvágó (2017). This work supports the conclusion that the instructions that accompany a mechanism (e.g., regarding strategy-proofness) are an important part of its design, and that effective instructions may be hard to design.…”

School Choice And Loss Aversion

“…In field data, misrepresentations are hard to identify since the true preferences are subjective and private. However, Hassidim et al (2017b), Shorrer and Sóvágó (2017) and Artemov et al (2017) exploit objective rankings in their data to expose "obvious misrepresentations", 10 and they all find the same pattern. For instance, Shorrer and Sóvágó (2017) discover that a nonnegligible fraction of these misrepresentations are costly, leaving over $3,000 on the table on average.…”

“…Through differences in perceived discrimination, our model can resolve apparently contradictory findings in the data. WhileShorrer and Sóvágó (2017) document that students with better socioeconomic background are more likely to deviate, Chen and Pereyra (2019) make the opposite observation. Higher social status may lead to a more pessimistic belief about getting a tuition waiver, but cause a more optimistic belief about getting into an elite school.5 For instance, the score may represent the result of a general assessment test, such as the SAT or GRE.…”