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What Pareto-Efficiency Adjustments Cannot Fix

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  • Josue Ortega
  • Gabriel Ziegler
  • R. Pablo Arribillaga
  • Geng Zhao

Abstract

The Deferred Acceptance (DA) algorithm is stable and strategy-proof, but can produce outcomes that are Pareto-inefficient for students, and thus several alternative mechanisms have been proposed to correct this inefficiency. However, we show that these mechanisms cannot correct DA's rank-inefficiency and inequality, because these shortcomings can arise even in cases where DA is Pareto-efficient. We also examine students' segregation in settings with advantaged and marginalized students. We prove that the demographic composition of every school is perfectly preserved under any Pareto-efficient mechanism that dominates DA, and consequently fully segregated schools under DA maintain their extreme homogeneity.

Suggested Citation

  • Josue Ortega & Gabriel Ziegler & R. Pablo Arribillaga & Geng Zhao, 2025. "What Pareto-Efficiency Adjustments Cannot Fix," Papers 2506.11660, arXiv.org.
    • Handle: RePEc:arx:papers:2506.11660
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    File URL: http://arxiv.org/pdf/2506.11660
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    References listed on IDEAS

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    1. Alfred Galichon & Octavia Ghelfi & Marc Henry, 2021. "Stable and extremely unequal," Papers 2108.06587, arXiv.org, revised Mar 2023.
    2. Galichon, Alfred & Ghelfi, Octavia & Henry, Marc, 2023. "Stable and extremely unequal," Economics Letters, Elsevier, vol. 226(C).
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