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Research Spotlight Feature: On Bounded Rationality

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On Bounded Rationality: An Investigation on Parents’ Preference for Children’s Schooling in Orange County, California

Miya (Yuqi) Liu Northwood High School August 6, 2021

Abstract It is a frequently-held capitalist belief that market-driven private educational institutions offer better services than public educational institutions (Couch et al., 1993; Sonstelie, 1979; Barzel and Deacon, 1975; Flowers, 1975; Stiglitz, 1974). Despite recent data suggesting the outperformance of public school students versus their private-school peers, parents often regard private education as a better alternative for their children (Lubienski & Lubienski, 2014). Families in Orange County, California fall into such a category. Hence, this research investigates the rationale behind parents in selected cities in Orange County on their seemingly contradicting preference for private over public schools for their children by identifying whether bounded rationality exists in their decision-making process. The research employs both qualitative and quantitative approaches. The qualitative approach takes the form of a survey and employs a latent variable model to capture the most prominent factors behind parents’ decisions for their children’s schooling. The quantitative approach uses a linear regression model to analyze the statistically significant variables that explain parents’ choices for schooling for their children. The research then compares results from the two approaches. Depending on how those results match each other, identifications can be made on whether bounded rationality is at play in parents’ schooling decisions. The hypothesis is that parents’ preference for private over public schools is likely a result of false information and misconception of the education market, that is, a lack of understanding of the actual value offered by private compared to public schools. If this is true, then policies aiming to better inform parents of the value of public school education can effectively reduce household education expenditures and improve the quality of children’s educational experience in the area.



Miya Liu - On Bounded Rationality
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