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Chapter 14: Problem 6

Under "early decision" college admission plans, students apply to a college in the fall and, if they are accepted, they must enroll in that college. Some critics of early decision plans, including some college presidents, argue that the plans put too much pressure on students to decide early in their senior year in high school which college to attend. Some college administrators have proposed abolishing early decision plans, but as a columnist in the New York Times noted, "It's more prevalent than ever, with some selective schools using it to fill upward of 40 percent of their incoming freshman class." If many college administrators believe that early decision plans should be abolished, why do their schools continue to use them? Can game theory help analyze this situation?

Short Answer

Expert verified
Despite some college administrators believing that early decision plans should be abolished, their schools continue to use them because of the competitive advantage it provides in securing students early (increasing yield) and outpacing competing institutions. Game theory helps us understand this situation: colleges operate in a competitive environment, and their actions are driven not only by their own beliefs, but also by the anticipated decisions of other institutions. Dropping early decision might put a school at a competitive disadvantage if other schools maintain their plans.

Step by step solution

01

Understanding Early Decision Plans

Early Decision (ED) plans are binding commitments to a college. If a student is accepted, they must withdrawal all other applications and attend the college that accepted them. The benefit for the college is that they can secure a certain portion of their incoming class early, and have a higher yield (percentage of accepted students who enroll).
02

Understanding Game Theory

Game Theory is a theoretical framework for conceiving social situations among competing players. It involves understanding the strategic interaction between different players, where the strategy of one affects the outcome of the other. Actions are based on the anticipation of the actions of other players.
03

Applying Game Theory to Early Decision Plans

From a game theory perspective, if a school drops early decision but its competitors do not, the school may lose prospective students to competitors that continue to implement ED. Since most students apply to multiple colleges, colleges that do not offer ED could end up with less yield as students have more options and may opt for colleges that accepted them through ED. Thus, even if a college feels ED is negative, they might be compelled to continue it as long as their competitors also do.

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Most popular questions from this chapter

Bob and Tom are two criminals who have been arrested for burglary. The police put Bob and Tom in separate cells. They offer to let Bob go free if he confesses to the crime and testifies against Tom. Bob also is told that he will serve a 15 -year prison sentence if he remains silent while Tom confesses. If Bob confesses and Tom also confesses, they will each serve a 10-year sentence. Separately, the police make the same offer to Tom. Assume that Bob and Tom know that if they both remain silent, the police have only enough evidence to convict them of a lesser crime, and they will both serve 3 -year sentences. a. Use the information provided to write a payoff matrix for Bob and Tom. b. Does Bob have a dominant strategy? If so, what is it? c. Does Tom have a dominant strategy? If so, what is it? d. What prison sentences do Bob and Tom serve? How might they have avoided this outcome?

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In the Apple first launched Apple Music, singer Taylor Swift refused to allow her album \(1989,\) which had been the best-selling album of the year, to be made available for the service because Apple did not intend to pay royalties on songs it streamed during an initial three-month period when the service would be free to subscribers. In response, Apple changed its policy and agreed to pay royalties during those three months, even though doing so reduced its profit. Do singers typically have substantial bargaining power with Apple, Spotify, and the other streaming services? Briefly explain.

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