What's the Matter with Tie-breaking? Improving Efficiency in School Choice

    Aytek Erdil and Haluk Ergin, American Economic Review, 98(3), June 2008, 669-689

    In several school choice districts in the United States, the student proposing deferred acceptance algorithm is applied after indifferences in priority orders are broken in some exogenous way. Although such a tie-breaking procedure preserves stability, it adversely affects the welfare of the students since it introduces artificial stability constraints. Our main finding is a polynomial-time algorithm for the computation of a student-optimal stable matching when priorities are weak. The idea behind our construction relies on a new notion which we call a stable improvement cycle. We also investigate the strategic properties of the student optimal stable mechanism.