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An exploration in school formation: Income vs. Ability


  • Alkan, Ahmet
  • Anbarci, Nejat
  • Sarpça, Sinan


We study stable school formation among four students that differ in ability and income. In the presence of ability complementarities and school costs to be shared, we identify the conditions under which a stable allocation is efficient, inefficient, nonexistent, and tell who become peers.

Suggested Citation

  • Alkan, Ahmet & Anbarci, Nejat & Sarpça, Sinan, 2012. "An exploration in school formation: Income vs. Ability," Economics Letters, Elsevier, vol. 117(2), pages 500-504.
  • Handle: RePEc:eee:ecolet:v:117:y:2012:i:2:p:500-504 DOI: 10.1016/j.econlet.2012.06.048

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    References listed on IDEAS

    1. Jacob M. Markman & Eric A. Hanushek & John F. Kain & Steven G. Rivkin, 2003. "Does peer ability affect student achievement?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 527-544.
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    6. Patrick Legros & Andrew F. Newman, 2007. "Beauty Is a Beast, Frog Is a Prince: Assortative Matching with Nontransferabilities," Econometrica, Econometric Society, vol. 75(4), pages 1073-1102, July.
    7. Henderson, Vernon & Mieszkowski, Peter & Sauvageau, Yvon, 1978. "Peer group effects and educational production functions," Journal of Public Economics, Elsevier, vol. 10(1), pages 97-106, August.
    8. Sotomayor, Marilda, 2000. "Existence of stable outcomes and the lattice property for a unified matching market," Mathematical Social Sciences, Elsevier, vol. 39(2), pages 119-132, March.
    9. Stacy Berg Dale & Alan B. Krueger, 2002. "Estimating the Payoff to Attending a More Selective College: An Application of Selection on Observables and Unobservables," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1491-1527.
    10. Dennis Epple & Richard Romano & Holger Sieg, 2006. "Admission, Tuition, and Financial Aid Policies in the Market for Higher Education," Econometrica, Econometric Society, vol. 74(4), pages 885-928, July.
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    13. Hanushek Eric A & Sarpça Sinan & Yilmaz Kuzey, 2011. "Private Schools and Residential Choices: Accessibility, Mobility, and Welfare," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-34, August.
    14. Talman, Dolf & Yang, Zaifu, 2011. "A model of partnership formation," Journal of Mathematical Economics, Elsevier, vol. 47(2), pages 206-212, March.
    15. Marek Pycia, 2012. "Stability and Preference Alignment in Matching and Coalition Formation," Econometrica, Econometric Society, vol. 80(1), pages 323-362, January.
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    Cited by:

    1. Ahmet Alkan & Alparslan Tuncay, 2014. "Pairing Games and Markets," Working Papers 2014.48, Fondazione Eni Enrico Mattei.

    More about this item


    School formation; Stable matching; Peer effects; Multilateral bargaining; Assortative matching;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education


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