Gaming the School Choice Mechanism

Monday, January 25, 2010

Many public school choice programs use centralized mechanisms to match students with schools inabsence of market-clearing prices. Among them, the Boston mechanism is one of the most widely used.
It is well-known that truth-telling may not be optimal under the Boston mechanism, which raises the concern that the mechanism may create a disadvantage to parents who do not strategize or do not strategize well. Using a data set from Beijing, this paper investigates parents’ strategic behavior under the Boston mechanism and its welfare implications. School choice is modeled as a simultaneous game with parents’ preferences being private information. The paper derives restrictions on parents’ behavior under various assumptions on their information and sophistication, and the model is estimated by simulated maximum likelihood. The results suggest that parents’ sophistication is heterogeneous; when parents have a greater incentive to behave strategically, they pay more attention to uncertainty and strategize better. There is no robust evidence that wealthier/more educated parents strategize better. If the Boston mechanism is replaced by the Deferred-Acceptance mechanism under which truth-telling is always optimal, among the sophisticated parents who always play a best response, the majority of them are worse off, and almost none of them are better off. The reform benets half of the naive parents who are always truth-telling, while it also hurts about 20% of them.

Yinghua He

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