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College admissions with entrance exams: Centralized versus decentralized

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  • Hafalir, Isa E.
  • Hakimov, Rustamdjan
  • Kübler, Dorothea
  • Kurino, Morimitsu

Abstract

We study a college admissions problem in which colleges accept students by ranking students' efforts in entrance exams. Students' ability levels affect the cost of their efforts. We solve and compare equilibria of “centralized college admissions” (CCA) where students apply to all colleges and “decentralized college admissions” (DCA) where students only apply to one college. We show that lower ability students prefer DCA whereas higher ability students prefer CCA. Many predictions of the theory are supported by a lab experiment designed to test the theory, yet we find a number of differences that render DCA less attractive than CCA compared to the equilibrium benchmark.

Suggested Citation

  • Hafalir, Isa E. & Hakimov, Rustamdjan & Kübler, Dorothea & Kurino, Morimitsu, 2018. "College admissions with entrance exams: Centralized versus decentralized," Journal of Economic Theory, Elsevier, vol. 176(C), pages 886-934.
    • Handle: RePEc:eee:jetheo:v:176:y:2018:i:c:p:886-934
    DOI: 10.1016/j.jet.2018.05.009
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    More about this item

    Keywords

    College admissions; Incomplete information; Student welfare; Contests; All-pay auctions; Experiment;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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