Econ 206 Term Paper, finally done!!! Thank Prof. Kibris and Prof. Becker!

Abstract: Pre-exam recruitment (PER) self-arranged by colleges in China is the alternative admission method outside the centralized National College Entrance Examination (NCEE) System, and it has become increasingly prevalent among colleges over the recent years. We attribute this rapid spread of PER to the reform of the admission policy which renders the admission mechanism vulnerable to college manipulation. The former “sequential mechanism” is equivalent to Boston mechanism, and it is not strategy-proof for students or colleges. Under that old mechanism, students strategize in a sophisticated level that leaves no incentive for colleges to manipulate, since the overall space for Pareto improvement is limited. The reform brings about the “parallel mechanism”, which generates the matchings that are equivalent to both the student-optimal and college-optimal deferred acceptance algorithm under the acyclic priority structure. Since students can only submit a fixed length of preference list in the application, this new mechanism is strategy-proof for them. However, it is manipulable for individual colleges because PER allows them to reallocate their type specific quotas. Colleges can reduce the quality gap between different types of students, so as to improve the overall qualities of students admitted. However, unlike the manipulation under the inefficient “sequential mechanism”, the “parallel mechanism” which is college optimal has no space for Pareto improvement for all the colleges as a whole. Under this mechanism, individual college benefits themselves at the expense of hurting other colleges, but some students of cyclic preferences strictly benefits from PER as they are able to attend their more favorable colleges. In equilibrium, all the colleges participate in PER and allocate their quotas in accordance with the distributions of students across types. However, this equilibrium is unattainable as the proportion of capacities set aside for PER can never be 100% under the existing education policy. Colleges thus keep enlarging this proportion as a response of other colleges’ PER, and this may partly explain why we observe the increasing prevalence of PER.