Inference by college admission departments

Theoretical, experimental and empirical research by economists and psychologists suggests biases in how people draw inferences. Eyster and Rabin (2005) review extensive experimental evidence that suggests people do not fully take into account how other people’s actions depend on their private information. Using data from two colleges with optional SAT I policies, this paper quantifies the extent to which players underestimate this relationship. This policy provides applicants with a choice of whether to disclose their SATI scores to the college. Our empirical estimates indicate that colleges do underestimate the relationship between an applicant’s action (not submitting) and type (SATI score).