Option Value Neglect: Evidence from Centralized College Admission

Sequential choices are ubiquitous in daily life, yet making optimal decisions in such settings—where properly accounting for option value is crucial—can be challenging. This paper provides field experimental evidence on the neglect of option value in high-stakes decisions and quantifies the associated welfare consequences. We study a centralized college admissions system where students submit brief preference lists. Although option value should encourage riskier top choices, many students are overly cautious and fail to include safer lower-ranked options. We argue that directed cognition—making myopic decisions while ignoring the value of subsequent options—explains this behavior. An in-field experiment targeting a key framing-based prediction shows that about 50% of applicants exhibit this pattern, especially among disadvantaged students. Counterfactual analysis suggests that de-biasing interventions could significantly reduce outcome gaps and improve overall efficiency.