There are many ways to interpret this data, but one is that most people are not great at choosing the right school or spouse or job. It’s hard to find “the one”.
How to improve this matching process has long been a puzzle for economists, with implications spanning a wide range of markets, from work and education to ridesharing and real estate.
“There is a large literature on this,” he says Benjamin Friedrichassociate professor of strategy at Kellogg, “which primarily assumes that participants in a market know how to best sort their options.”
In most real-life situations, however, Friedrich explains that we usually don’t have all the information we need. For example, colleges or employers may want to know what their competitors know about a given candidate, as well as what the applicant thinks about the schools or jobs to which she is applying. Likewise, applicants would like to know how colleges or companies view them compared to other applicants. Finding the best match often depends on information that other parties choose to withhold.
New research from Friedrich illuminates the importance of this hidden information in finding good matches—and finds that greater transparency has the potential to improve the process, although such transparency can be difficult to implement in practice.
With UCLA’s Martin Hackmann, Princeton’s Adam Kapor and Sofia Moroni, and VIVE’s Anne Brink Nandrup, Friedrich studied the dynamics of the matching process in the context of Danish medical schools.
Danish medical schools have some of the highest dropout rates of any reference country. For example, at Aarhus University in north-east Denmark, the number is 20 percent. For comparison, dropout rates in the US and United Kingdom they range between 2 and 4 percent. Improving the matches between Danish medical schools and their applicants, then, would mean fewer students who don’t graduate, fewer wasted resources for the schools, and more and better doctors in a market facing shortages.
“Doctors are scarce and the shortage is increasing, especially in rural areas,” says Friedrich. “This is a major policy problem.”
The Danish medical school market
In Denmark, high school students who want to attend college submit a ranking list of their top eight preferred universities, along with their area of study (or major), to the Central Admissions Office. For example, a student may list a major in medicine at the University of Copenhagen as a first choice. medicine at Aarhus University second; biology at the University of Copenhagen third; and so on. (Denmark combines its undergraduate and medical education into a six-year program, unlike the US, which has separate programs for college and medical school.)
On the other side of the equation, universities offer admissions in two ways. First, a percentage of each class is filled with students based solely on their GPA. A second number of applicants are then admitted based on other admissions criteria designed by the university, such as personal essays or interviews. Applicants can choose whether they want to be considered for this second group, for example by submitting an essay or agreeing to an interview. At this stage, applicants do not know the minimum GPA for admission (and thus whether submitting additional material will be beneficial). Applicants are then matched with the school that accepts them and is highest on the top eight list.
Importantly, schools do not know where they rank on each applicant’s list, and students do not know how they scored on program assessments such as interviews or quantitative tests.
But the researchers wanted to know: Could the matching process be improved if they had this information?
To find out, researchers analyzed data that included medical school applicant rankings, as well as information showing how three Danish medical schools ranked applicants they didn’t automatically admit based on GPA. The team also had data on where applicants ultimately enroll, along with their outcomes: whether they dropped out and what their job prospects were after graduation.
The value of personal information
The researchers found that the success of matches in the college-medical school market depends heavily on information that the parties sometimes hide from each other, such as an applicant’s true level of commitment. When medical schools gain access to this information, they are better at identifying applicants who are more likely to remain in their program.
This becomes apparent when we compare applicants who were admitted based on GPA alone (which was mandatory) to those who were admitted based on additional information (which was voluntary). For colleges, an applicant’s willingness to submit additional information to the school signals a degree of commitment on the applicant’s part that would otherwise be hidden. “It indicates that the student is serious about trying to get into school,” says Friedrich.
Indeed, applicants admitted through supplemental information had significantly lower dropout rates than those admitted through GPA alone. Even among applicants admitted based on GPA alone, those who submitted supplemental information in case they didn’t make the initial GPA cut had lower dropout rates than those who didn’t—underscoring the value of a screening process that reveals level of commitment of applicants. And when the researchers compared applicants who were just above the admissions cutoff on GPA alone with those who were just below but were still admitted based on secondary information, they found that this latter group was far more successful in terms of graduation rate .
In other words, when schools had additional information about an applicant’s interest and commitment to a program, as well as screening tools to assess their fit, it resulted in a better match than when that information remained hidden .
The impact of information transparency was demonstrated in a real experiment at one of the medical schools, Odense. In 2002, the school instituted a more rigorous screening process for applicants not initially admitted based on GPA alone. The process required them to take a knowledge test, submit an essay explaining their motivations for pursuing medicine, and complete a personal interview. The researchers found that after the school began this initiative—which required applicants to provide personal information not available with the previous screening process—there was a significant decrease in the school’s overall dropout rate.
This change also had a knock-on effect on other schools. As Odense upgraded its screening process and reduced dropout rates, its closest rival school, Aarhus, saw the opposite – an increase in dropout rates.
“That’s another place where interdependence comes in,” says Friedrich. “We have a list of students who ranked Odense above Aarhus who were rejected by Odense through this new screening. These are among the worst students who enrolled in Aarhus and lowered the overall graduation rate.”
The challenge of improving games
Although Odense was able to improve its graduation rates through more informed screening, researchers note that it is difficult to project sweeping improvements in a similar market like this.
To explore the possibilities, they built a model to simulate the dynamics of the Danish medical school market. With this model, they created a world where everyone knows everything about everyone. there is no private information between schools or applicants. In this scenario, they found that dropout rates drop sharply. In short: there is a lot of room for improvement in the real world through information transparency.
Using this result as a benchmark, the researchers then simulated several different interventions that policymakers could implement to improve outcomes. For example, they explored what it would be like if all schools were able to learn each applicant’s first choice. In theory, this could provide another signal to schools to determine which students are most serious about attending their program.
According to the model, this intervention makes almost no difference to student dropout rates, as applicants begin to use their first choice strategically to game the system.
“It’s a disappointing result and shows how difficult it is to design mechanisms or interventions in these information structures that actually improve the quality of the match,” says Friedrich. “While we know there’s a lot of room for improvement, unfortunately, we didn’t find any low-hanging fruit.”
This does not mean that improvement is a lost cause. Although reforms in one school (Odense) negatively affected another (Aarhus), they proved that improvements are possible. What’s essential to keep in mind when considering new policy interventions is that the information each actor has—in this case, students and schools—plays a common role in how well everyone does, Friedrich says.
“Here we have the first evidence of these interdependent strategic factors,” he says. “If we’re planning a change in a market like this, then we have to think very carefully about the possible strategic responses of everyone involved.”
