COURSE BIDDING AT BUSINESS SCHOOLS*

Authors

  • Tayfun Sönmez,

    1. Boston College, U.S.A.
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  • M. Utku Ünver

    1. Boston College, U.S.A.
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    • 1

      We would like to thank seminar participants at London Business School, Stanford ITE Workshop on Matching Markets, GAMES at Marseille, CED at Palma de Mallorca, Murat Sertel Memorial Conference at Istanbul, SCW at Osaka, Boğaziçi, Texas A&M, and Pittsburgh for their insightful comments. We also thank an associate editor, two anonymous referees, and Kin Wong for useful suggestions. Sönmez gratefully acknowledges the research support of KoçBank via the KoçBank scholar program and Turkish Academy of Sciences in the framework of the Distinguished Young Scholar Award Program and the NSF via grant SES-0616470. Ünver gratefully acknowledges the research support of Turkish Academy of Sciences in the framework of the Distinguished Young Scholar Award Program and the NSF via grants SES-0338619 and SES-0616689. Any errors are our own responsibility. Please address correspondence to: M. Utku Ünver, Department of Economics, Boston College, 21 Campanella Way - Room 468, Chestnut Hill, MA 02467. Phone: 617 552 2217. Fax: 617 552 2308. E-mail: muunver@gmail.com,sonmezt@bc.edu.


  • *

    Manuscript received December 2006; revised December 2007.

Abstract

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: to infer student preferences and 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, these mechanisms, which are promoted as market mechanisms, do not necessarily yield market outcomes. We introduce a Pareto-dominant market mechanism that can be implemented by asking students for their preferences in addition to their bids over courses.

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