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Course Bidding at Business Schools

  • Tayfun Sönmez

    ()

    (Boston College)

  • M. Utku Ünver

    (Koç University)

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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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 618.

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Length: 31 pages
Date of creation: 12 Sep 2005
Date of revision:
Handle: RePEc:boc:bocoec:618
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