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The Multi-unit Assignment Problem: Theory and Evidence from Course Allocation at Harvard

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  • Eric Budish
  • Estelle Cantillon

Abstract

We use theory and field data to study the draft mechanism used to allocate courses at Harvard Business School. We show that the draft is manipulable in theory, manipulated in practice, and that these manipulations cause significant welfare loss. Nevertheless, we find that welfare is higher than under its widely studied strategyproof alternative. We identify a new link between fairness and welfare that explains why the draft performs well despite the costs of strategic behavior, and then design a new draft that reduces these costs. We draw several broader lessons for market design, regarding Pareto efficiency, fairness, and strategyproofness. (JEL D63, D82, I23)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.5.2237
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 5 (August)
Pages: 2237-71

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:5:p:2237-71

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References

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  1. Roth, Alvin, 2008. "What Have We Learned from Market Design?," Scholarly Articles 2579650, Harvard University Department of Economics.
  2. Manea, Mihai, 2007. "Serial dictatorship and Pareto optimality," Games and Economic Behavior, Elsevier, vol. 61(2), pages 316-330, November.
  3. Dirk Bergemann & Stephen Morris, 2003. "Robust Mechanism Design," Levine's Bibliography 666156000000000035, UCLA Department of Economics.
  4. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March.
  5. Hideo Konishi & Thomas Quint & Jun Wako, 2000. "On the Shapley-Scarf Economy: The Case of Multiple Types of Indivisible Goods," Boston College Working Papers in Economics 484, Boston College Department of Economics.
  6. Peter Coles & Alexey Kushnir & Muriel Niederle, 2010. "Preference Signaling in Matching Markets," NBER Working Papers 16185, National Bureau of Economic Research, Inc.
  7. Brams,Steven J. & Taylor,Alan D., 1996. "Fair Division," Cambridge Books, Cambridge University Press, number 9780521556446, November.
  8. EHLERS, Lars & MASSÓ, Jordi, 2007. "Matching Markets under (In)complete Information," Cahiers de recherche 01-2007, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  9. Brams, S. J. & Eldelman, P. H. & Fishburn, P. C., 2000. "Fair Division of Indivisible Items," Working Papers 00-15, C.V. Starr Center for Applied Economics, New York University.
  10. 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.
  11. Bettina Klaus & Eiichi Miyagawa, 2002. "Strategy-proofness, solidarity, and consistency for multiple assignment problems," International Journal of Game Theory, Springer, vol. 30(3), pages 421-435.
  12. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
  13. Yeon-Koo Che & Fuhito Kojima, 2008. "Asymptotic Equivalence of Probabilistic Serial and Random Priority Mechanisms," Discussion Papers 0809-06, Columbia University, Department of Economics.
  14. Tayfun Sonmez & M. Utku Unver, 2003. "Course Bidding at Business Schools," Game Theory and Information 0306001, EconWPA, revised 02 Jan 2004.
  15. Varian, Hal R., 2007. "Position auctions," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1163-1178, December.
  16. Bogomolnaia, Anna & Moulin, Herve, 2001. "A New Solution to the Random Assignment Problem," Journal of Economic Theory, Elsevier, vol. 100(2), pages 295-328, October.
  17. Atila Abdulkadiroglu & Yeon-Koo Che & Yosuke Yasuda, 2008. "Expanding "Choice" in School Choice," GRIPS Discussion Papers 08-17, National Graduate Institute for Policy Studies.
  18. Nurmi, Hannu, 1996. "Fair division: From cake-cutting to dispute resolution : Steven J. Brams and Alan D. Taylor, (Cambridge University Press, Cambridge, 1995) pp. xiv + 272, US$ 54.95 (hardcover), US$ 18.95 (paper)," European Journal of Political Economy, Elsevier, vol. 12(1), pages 169-172, April.
  19. Lars Ehlers & Bettina Klaus, 2003. "Coalitional strategy-proof and resource-monotonic solutions for multiple assignment problems," Social Choice and Welfare, Springer, vol. 21(2), pages 265-280, October.
  20. John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61, pages 434.
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Citations

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Cited by:
  1. Aziz, Haris & Brandt, Felix & Brill, Markus, 2013. "The computational complexity of random serial dictatorship," Economics Letters, Elsevier, vol. 121(3), pages 341-345.
  2. Mariagiovanna Baccara & Ayse Imrohoroglu & Alistair J. Wilson & Leeat Yariv, 2012. "A Field Study on Matching with Network Externalities," American Economic Review, American Economic Association, vol. 102(5), pages 1773-1804, August.
  3. Daniel Monte & Norovsambuu Tumennasan, 2012. "Centralized Allocation in Multiple Markets," Economics Working Papers 2012-09, School of Economics and Management, University of Aarhus.
  4. Kojima, Fuhito, 2013. "Efficient resource allocation under multi-unit demand," Games and Economic Behavior, Elsevier, vol. 82(C), pages 1-14.
  5. Tayfun Sönmez, 2011. "Bidding for Army Career Specialties: Improving the ROTC Branching Mechanism," Boston College Working Papers in Economics 783, Boston College Department of Economics.
  6. Chen, Ning & Li, Mengling, 2013. "Ties matter: improving efficiency in course allocation by introducing ties," MPRA Paper 47031, University Library of Munich, Germany.
  7. EHLERS, Lars & WESTKAMP, Alexander, 2011. "Strategy-Proof Tie-Breaking," Cahiers de recherche 2011-07, Universite de Montreal, Departement de sciences economiques.
  8. Hougaard, Jens Leth & Moreno-Ternero, Juan D. & Østerdal, Lars Peter, 2012. "Assigning agents to a line," Discussion Papers of Business and Economics 11/2012, Department of Business and Economics, University of Southern Denmark.
  9. Dobzinski, Shahar & Lavi, Ron & Nisan, Noam, 2012. "Multi-unit auctions with budget limits," Games and Economic Behavior, Elsevier, vol. 74(2), pages 486-503.
  10. Tayfun Sönmez & Tobias B. Switzer, 2011. "Matching with (Branch-of-Choice) Contracts at United States Military Academy," Boston College Working Papers in Economics 782, Boston College Department of Economics.

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