School choice with farsighted students

Abstract

We consider priority-based school choice problems with farsighted students. We show that a singleton set consisting of the matching obtained from the Top Trading Cycles (TTC) mechanism is a farsighted stable set. How- ever, the matching obtained from the Deferred Acceptance (DA) mechanism may not belong to any farsighted stable set. Hence, the TTC mechanism provides an assignment that is not only Pareto efficient but also farsightedly stable. Moreover, looking forward three steps ahead is already su cient for stabilizing the matching obtained from the TTC. In addition, we show that variations of TTC that improve in terms of no justi ed envy are farsightedly stable, but may require more farsightedness on behalf of students.