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Course Bidding at Business Schools

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  • Tayfun Sonmez

    (Koc University)

  • M. Utku Unver

    (Koc University)

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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Bibliographic Info

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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Cited by:
  1. Eric Budish & Estelle Cantillon, 2012. "The Multi-unit Assignment Problem: Theory and Evidence from Course Allocation at Harvard," American Economic Review, American Economic Association, vol. 102(5), pages 2237-71, August.
  2. Atila Abdulkadiroglu & Yeon-Koo Che & Yosuke Yasuda, 2008. "Expanding "Choice" in School Choice," Discussion Papers 0809-09, Columbia University, Department of Economics.
  3. Manea, Mihai, 2007. "Serial dictatorship and Pareto optimality," Games and Economic Behavior, Elsevier, vol. 61(2), pages 316-330, November.
  4. Alistair Wilson & Mariagiovanna Baccara & Ayse Imrohoroglu & Leeat Yariv, 2009. "A Field Study on Matching with Network Externalities," Working Papers 486, University of Pittsburgh, Department of Economics, revised Sep 2011.
  5. Surajeet Chakravarty & Todd R. Kaplan, 2010. "Optimal Allocation without Transfer Payments," Discussion Papers 1004, Exeter University, Department of Economics.
  6. Jens Josephson & Joel Shapiro, 2008. "Interviews and Adverse Selection," Working Papers 349, Barcelona Graduate School of Economics.
  7. Wilfred Amaldoss & Teck-Hua Ho & Aradhna Krishna & Kay-Yut Chen & Preyas Desai & Ganesh Iyer & Sanjay Jain & Noah Lim & John Morgan & Ryan Oprea & Joydeep Srivasatava, 2008. "Experiments on strategic choices and markets," Marketing Letters, Springer, vol. 19(3), pages 417-429, December.
  8. Franz Diebold & Haris Aziz & Martin Bichler & Florian Matthes & Alexander Schneider, 2014. "Course Allocation via Stable Matching," Business & Information Systems Engineering, Springer, vol. 6(2), pages 97-110, April.
  9. John Hatfield, 2009. "Strategy-proof, efficient, and nonbossy quota allocations," Social Choice and Welfare, Springer, vol. 33(3), pages 505-515, September.
  10. Kojima, Fuhito, 2008. "The law of aggregate demand and welfare in the two-sided matching market," Economics Letters, Elsevier, vol. 99(3), pages 581-584, June.
  11. Horstschräer, Julia, 2012. "Decentralizing university admission: Evidence from a natural experiment," ZEW Discussion Papers 12-076, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  12. Chen, Ning & Li, Mengling, 2013. "Ties matter: improving efficiency in course allocation by introducing ties," MPRA Paper 47031, University Library of Munich, Germany.
  13. Kojima, Fuhito, 2013. "Efficient resource allocation under multi-unit demand," Games and Economic Behavior, Elsevier, vol. 82(C), pages 1-14.

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