Seminar: Yinghua He, Toulouse School of Economics

Title: Gaming the Boston School Choice Mechanism.

Abstract:

Many public school choice programs use centralized mechanisms to match students with schools in absence 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 behaviors 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 ability to predict others' behavior, and the model is estimated using 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 and/or more educated parents strategize better. If the Boston mechanism is replaced by the Deferred-Acceptance mechanism under which truth-telling is always optimal, the majority of the sophisticated parents who always play a best response are worse off. This kind of reform benefits half of the naive parents who are always truth-telling under the Boston mechanism, while it also hurts about 20% of them.