Using Theory, Markets and Experimental Methods to Improve a Complex Administrative Decision Process: School Transportation for Disadvantaged Students

Abstract

The paper studies structural inefficiencies of administrative decisions demonstrated in an example from the growing government service sector. The provision of school transportation to disadvantaged children touches social concerns and regulations related to classical conditions of limited competition. The decision process is partitioned into key economic functions related to the challenges faced by the government when dealing with environments in which theory predicts market failures. Theories drawn from public choice theory and theories of auctions suggest policy changes that were experimentally tested in the challenging environment. Field data demonstrate the new processes produced improved allocations. Subsequent laboratory tests demonstrate the success can be attributed to the principles used in the theory and demonstrate a robust link connecting efficient behaviors observed in laboratory experiments and behaviors found in field events.