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Course Bidding at Business Schools

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Author Info
Tayfun Sonmez (Koc University)
M. Utku Unver (Koc University)

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Abstract

Mechanisms that rely on course bidding are widely used at Business Schools in order to allocate seats at oversubscribed courses. Bids play two key roles under these mechanisms: Bids are used to infer student preferences and bids are used to determine who have bigger claims on course seats. We show that these two roles may easily conflict and preferences induced from bids may significantly differ from the true preferences. Therefore while these mechanisms are promoted as market mechanisms, they do not necessarily yield market outcomes. The two conflicting roles of bids is a potential source of efficiency loss part of which can be avoided simply by asking students to state their preferences in addition to bidding and thus "separating" the two roles of the bids. While there may be multiple market outcomes under this proposal, there is a market outcome which Pareto dominates any other market outcome.

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Paper provided by EconWPA in its series Game Theory and Information with number 0306001.

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Date of creation: 02 Jun 2003
Date of revision: 02 Jan 2004
Handle: RePEc:wpa:wuwpga:0306001

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Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Gul, Faruk & Stacchetti, Ennio, 2000. "The English Auction with Differentiated Commodities," Journal of Economic Theory, Elsevier, vol. 92(1), pages 66-95, May. [Downloadable!] (restricted)
  2. Roth, Alvin E., 1985. "The college admissions problem is not equivalent to the marriage problem," Journal of Economic Theory, Elsevier, vol. 36(2), pages 277-288, August. [Downloadable!] (restricted)
  3. Paul Milgrom, 2000. "Putting Auction Theory to Work: The Simultaneous Ascending Auction," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 245-272, April. [Downloadable!] (restricted)
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  4. McMillan, John, 1994. "Selling Spectrum Rights," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 145-62, Summer. [Downloadable!] (restricted)
  5. Atila Abdulkadiroglu & Tayfun Sonmez, 2003. "School Choice: A Mechanism Design Approach," American Economic Review, American Economic Association, vol. 93(3), pages 729-747, June. [Downloadable!]
  6. McAfee, R Preston & McMillan, John, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-75, Winter. [Downloadable!] (restricted)
  7. Kelso, Alexander S, Jr & Crawford, Vincent P, 1982. "Job Matching, Coalition Formation, and Gross Substitutes," Econometrica, Econometric Society, vol. 50(6), pages 1483-1504, November. [Downloadable!] (restricted)
  8. Haluk I. Ergin, 2002. "Efficient Resource Allocation on the Basis of Priorities," Econometrica, Econometric Society, vol. 70(6), pages 2489-2497, November. [Downloadable!] (restricted)
  9. Alvin E. Roth, 2002. "The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics," Econometrica, Econometric Society, vol. 70(4), pages 1341-1378, July. [Downloadable!] (restricted)
  10. Balinski, Michel & Sonmez, Tayfun, 1999. "A Tale of Two Mechanisms: Student Placement," Journal of Economic Theory, Elsevier, vol. 84(1), pages 73-94, January. [Downloadable!] (restricted)
  11. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 4(2), pages 267-343, Summer.
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  12. Steven J. Brams & D. Marc Kilgour, 2001. "Competitive Fair Division," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 418-443, April. [Downloadable!] (restricted)
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  13. Alvin E. Roth & Elliott Peranson, 1999. "The Redesign of the Matching Market for American Physicians: Some Engineering Aspects of Economic Design," NBER Working Papers 6963, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Paul Milgrom, 2003. "Matching with Contracts," Working Papers 03003, Stanford University, Department of Economics. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jens Josephson & Joel Shapiro, 2008. "Interviews and Adverse Selection," Economics Working Papers 1093, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  2. Atila Abdulkadiroglu & Yeon-Koo Che & Yosuke Yasuda, 2008. "Expanding "Choice" in School Choice," Discussion Papers 0809-09, Columbia University, Department of Economics. [Downloadable!]
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