27 Jan 2015Working Paper Summaries

College Admissions as Non-Price Competition: The Case of South Korea

by Christopher Avery, Alvin E. Roth and Soohyung Lee

College admissions is a matching market—applicants cannot simply choose which college to attend, they must be admitted. From the perspective of colleges competing for top applicants, how can these institutions make the best strategic decisions and increase their own desirability? South Korea offers an ideal case study for analyzing efficiency in college admissions matching because the national government sets the rules in centralized fashion and South Korea has made several important changes in the rules in 1994. The authors develop a model to study the incentives for colleges before and after the reforms, and compare the predictions of the model to stylized facts about the behavior of South Korean colleges given each set of rules. The authors then assess the success of the reforms before and after these changes to admissions rules. Findings show that the 1994 South Korean college admission reforms increased the efficiency of the assignment process in two ways. First, these reforms reduced congestion, ensuring that all students could apply to at least three highly-ranked colleges (once in early admissions and then on two different dates in regular admissions). Second, this reform provided new information to colleges, enabling them to promote specialized matches in their regular admission decisions.

Author Abstract

This paper examines non-price competition among colleges to attract highly qualified students, exploiting the South Korean setting where the national government sets rules governing applications. We identify some basic facts about the behavior of colleges before and after a 1994 policy change that changed the timing of the national college entrance exam and introduced early admissions, and we propose a game-theoretic model that matches those facts. When applications reveal information about students that is of common interest to all colleges, lower-ranked colleges can gain in competition with higher-ranked colleges by limiting the number of possible applications.