Search and Biased Beliefs in Education Markets
Abstract
This paper examines how search costs, limited awareness of schools, misperceptions of school attributes, and inaccurate beliefs over unknown schools impact families search and application decisions in Chiles nationwide school choice process. We combine novel data on search activity with a panel of household surveys, administrative application data, randomized information experiments, and a model of demand and sequential search with subjective beliefs. Descriptively, households hold inaccurate beliefs and misperceptions along multiple dimensions, distorting perceived returns to search. Critically, households lack awareness of many schools and misperceive quality ratings of schools they know and prefer. Improving search technology would increase households search efforts and welfare. Correcting misperceptions of known schools observable attributes could allow students to match with higher-quality schools, achieving outcomes comparable to a full-information benchmark. Models excluding misperceptions would mistakenly predict quality reductions.
- Coauthors: Adam Kapor, Claudia Allende, Nano Ochoa, and Patrick Agte
- Published: Econometrica (R&R)
- Date: 2024-11-01
