Just Ask the Students at Virginia Tech About Tiebout

    When I toured colleges, I had a spreadsheet with rows for each school, with headers including “rank,” “location,” “nearest airport,” “Greek life,” “tuition,” “school colors,” etc. After each tour I filled in my spreadsheet, but little did I know I was actively shopping in a market. Tiebout’s model illustrates a preference revelation concept that requires many strict assumptions, likely the most unrealistic of which is that consumer-voters are fully mobile. In his case, consumers vote for an area’s revenue-expenditure model (the public goods they provide using tax dollars) by choosing to move there. In the case of universities, consumer-voters are much more mobile (they do not yet attend any school), there is an abundance of schools to choose from, and universities publish tons of statistics, making school selection a very applicable case for Tiebout’s model. My spreadsheet served as a personal utility function, where I measured schools' characteristics I cared about, then ultimately weighed them against each other. I was deciding which school would give me the most “bang for my buck,” and would then “vote” for its services by giving it my tuition money.

    However, different from the Tiebout model, consumer-voters cannot simply decide which institution gives them the highest utility and attend. A second decision-maker is involved in the transaction: the university’s admissions office, which can be interpreted as maximizing an entirely different utility function. The university wants to admit students who give it the most “bang for its buck,” in other words, the students who contribute to the institution's goals/reputation. So, the university’s anticipated utility from a given student is a function of their grades, extracurriculars, talents, likelihood of enrolling, etc. This is a stark difference from the housing market, where there are much tighter legal constraints on which characteristics can be considered for selection or exclusion. This two-sided matching market is an interesting limitation to the “vote with your feet” model, and seems to serve as an ultimate mobility constraint. A student may be willing to bear any moving cost to attend UVA, but if UVA says no, the preferences on the spreadsheet don’t matter – it’s no longer a feasible choice in the market. So, while students can craft a beautiful application spreadsheet with abundant schools to apply to, their final decision is limited by a second decision-maker (just ask the students at Virginia Tech).