School Choice with Asymmetric Information: Priority Design and the Curse of Acceptance

Abstract

We generalize standard school choice models to allow for interdependent preferences and differentially informed students. We show that, in general, the commonly used deferred acceptance mechanism is no longer strategy‐proof, the outcome is not stable, and may make less informed students worse off. We attribute these results to a curse of acceptance. However, we also show that if priorities are designed appropriately, positive results are recovered: equilibrium strategies are simple, the outcome is stable, and less informed students are protected from the curse of acceptance. Our results have implications for the current debate over priority design in school choice.