A tale of two mechanisms: Student placement

A new class of matching problems that models centralized college admissions via standardized tests is presented. The allocation mechanism that is used in real-life applications of this problem in Turkey is analyzed. It is sho wn that this mechanism, multi-category serial dictatorship, has a number of serious deficiencies, most notably inefficiency, vulnerability to manipula tion, and the potential of penalizing students for improved test scores. Ex ploiting the relation between this class of problems and the celebrated col lege admissions model (Gale & Shapley [4]), an alternative mechanism is pro posed that overcomes these deficiencies. This mechanism-the Gale-Shapley st udent optimal mechanism-is characterized as "best" in this context. Journal of Economic Literature Classification Numbers: C71, C78, D71, D78. (C) 199 9 Academic Press.