Motivated by recent initiatives to increase transparency in procurement, we study the effects of disclosing information about previous purchases in a setting where an organization delegates its purchasing decisions to its employees. When employees can use their own discretion —which may be influenced by personal preferences— to select a supplier, the incentives of the employees and the organization may be misaligned. Disclosing information about previous purchasing decisions made by other employees can reduce or exacerbate his misalignment, as peer effects may come into play. To understand the effects of transparency, we introduce a theoretical model that compares employees’ actions in a setting where they cannot observe each other’s choices, to a setting where they can observe the decision previously made by a peer before making their own. Two behavioral considerations are central to our model: that employees are heterogeneous in their reciprocity towards their employer, and that they experience peer effects in the form of income inequality aversion towards their peer. As a result, our model predicts the existence of negative spillovers as a reciprocal employee is more likely to choose the expensive supplier (which gives him a personal reward) when he observes that a peer did so. A laboratory experiment confirms the existence of negative spillovers and the main behavioral mechanisms described in our model. A surprising result not predicted by our theory, is that employees whose decisions are observed by their peers are less likely to choose the expensive supplier than the employees in the no transparency case. We show that observed employees’ preferences for compliance with the social norm of “appropriate purchasing behavior” explain our data well.
Ignacio Andres Rios
PhD Program, Operations, Information & Technology
PhD Program Office
Graduate School of Business
655 Knight Way
Stanford, CA 94305
Ignacio Andres Rios
Faculty AdvisorsDaniela Saban
In this paper, we present the design and implementation of a new system to solve the Chilean college admissions problem. We develop an algorithm that obtains all stable allocations when preferences are not strict and when all tied students in the last seat of a program (if any) must be allocated, and we used this algorithm to determine which mechanism was used to perform the allocation. Also, we propose a new method to incorporate the affirmative action that is part of the system and correct the inefficiencies that arise from having double-assigned students. By unifying the regular admission with the affirmative action, we have improved the allocation of approximately 3% of students every year since 2016. From a theoretical standpoint, we introduce a new concept of stability, and we show that some desired properties, such as strategy-proofness and monotonicity, cannot be guaranteed under flexible quotas. Nevertheless, we show that the mechanism is strategy-proof in the large, and therefore truthful reporting is approximately optimal.
Centralized school admission mechanisms are an attractive way of improving social welfare and fairness in large educational systems. In this paper we report the design and implementation of the newly established school choice mechanism in Chile, where over 274,000 students applied to more than 6,400 schools. The Chilean system presents unprecedented design challenges that make it unique. On the one hand, it is a simultaneous nationwide system, making it one of the largest school admission problems worldwide. On the other hand, the system runs at all school levels, from Pre-K to 12th grade, raising at least two issues of outmost importance; namely, the system needs to guarantee their current seat to students applying for a school change, and the system has to favor the assignment of siblings to the same school. As in other systems around the world, we develop a model based on the celebrated Deferred Acceptance algorithm. The algorithm deals not only with the aforementioned issues, but also with further practical features such as soft-bounds and overlapping types. In this context we analyze new stability definitions, present the results of its implementation and conduct simulations showing the benefits of the innovations of the implemented system.
We analyze the application process in the Chilean College Admissions problem. Students can submit up to 10 preferences, but most of the students do not fill their entire application list (“short-list”). Even though students face no incentives to misreport, we find evidence of strategic behavior as students tend to omit programs if their admission probabilities are too low. To rationalize this behavior, we construct a portfolio problem where students maximize their expected utility of reporting a ROL given their preferences and beliefs over admission probabilities. We adapt the estimation procedure proposed by Agarwal and Somaini (2018) to solve a large portfolio problem. To simplify this task, we show that it is sufficient to compare a ROL with only a subset of ROLs (“one-shot swaps”) to ensure its optimality without running into the curse of dimensionality. To better identify the model, we exploit a unique exogenous variation on the admission weights over time. We find that assuming truth-telling leads to biased results. Specifically, when students only include programs if it is strictly profitable to do so, assuming truth-telling underestimates how preferred are selective programs and overstates the value of being unassigned and the degree of preference heterogeneity in the system. Also, ignoring the constraint on the length of the list can result in biased estimates, even if the proportion of constrained ROLs is relatively small. Our estimation results strongly suggest that “short-list” students should not be interpreted as truth-tellers, even in a seemingly strategy-proof environment.
Work in Progress
Last Updated 5 Nov 2019