Assignment Mechanisms: Common Preferences and Information Acquisition

Abstract

I study costly information acquisition in a two-sided matching problem, such as matching applicants to schools. Applicant's utility is a sum of common and idiosyncratic components. The idiosyncratic component is unknown to applicants but can be learned at a cost. When applicants are assigned using an ordinal strategy-proof mechanism, too few acquire information, generating a significant welfare loss. Affirmative action and other realistic policies may lead to a Pareto improvement. As incentives to acquire information differ across mechanisms, ignoring such incentives may lead to incorrect welfare assessments, for example, in comparing a popular Immediate Assignment and an ordinal strategy-proof mechanism.