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August 30, 2017

Cluster-Seminar Public Finances and Living Conditions

Obvious Mistakes in a Strategically Simple College Admissions Environment


August 30, 2017
12:30 - 13:30


DIW Berlin im Quartier 110
Room 5.2.010
Mohrenstraße 58
10117 Berlin


Sándor Sóvágó (VU Amsterdam)

We provide direct field evidence that, even though the Hungarian college admissions process uses a strategically simple assignment mechanism, a large fraction of the applicants employ a dominated strategy. These applicants make obvious mistakes: they forgo the option for a tuition waiver worth thousands of dollars, even though this behavior has no benefit. In many cases, applicants would have received the tuition waiver had they asked for it. Obvious mistakes are more common among low-achieving students and high-socioeconomic-status students. Costly mistakes transfer tuition waivers from high- to low-socioeconomic status applicants and increase the number of students attending college. We exploit exogenous variation in the availability of tuition waivers and find that a rise in program selectivity substantially increases the likelihood of obvious mistakes, especially among high socioeconomic status applicants and low-achieving applicants.