A study co-authored by Corvinus University of Budapest researcher Péter Biró shows that the way universities match applicants, programmes and financial terms can influence not only who gets admitted, but also how fairly and effectively available places are used.

University admissions systems are often seen as technical processes: students submit their preferences, institutions define entry criteria, and an algorithm produces the final result. Yet the design of this process can have a direct impact on access, equity and institutional capacity.

The study, The Large Core of College Admission Markets: Theory and Evidence, examines admissions markets where students may attend the same programme under different financial terms, for example, with state funding or as self-funded students. While this may appear to be a technical detail, the paper shows that financial conditions can significantly shape admissions outcomes.

Funding is part of the choice

Although the research focuses on the Hungarian higher education admissions system, where applicants rank programme-financing combinations, the findings are relevant beyond Hungary. Many European universities face similar challenges, including demographic pressure, regional inequalities, unequal access and growing reliance on differentiated tuition and financial aid models. And Hungary offers a valuable case study for European universities because its centralised admissions system combines programme choice with different financial terms, making it possible to see how funding, access and capacity interact in a real higher education market.

“Even relatively small design choices can have meaningful consequences. This means they can indicate not only which programme they prefer, but also whether they would accept it with or without state funding”, said Péter Biró.

This matters because applicants do not relate to funding in the same way. Some are willing to enrol in a preferred programme even without public support, while others can realistically study only if they receive funding. The study shows that this diversity in student preferences can make the set of stable admissions outcomes much larger than standard models would suggest.

Stable does not always mean neutral

One of the most important lessons for universities is that a stable admissions outcome is not necessarily the only possible fair or efficient outcome. Different stable allocations may admit different students, distribute funding differently and even change the total number of admitted applicants.

In Hungary, the decision on who gets the funding at a program is purely merit-base, only those students can get a state scholarship who make the cutoff scores with their admission scores. However, in the US the admissions are based on merit, but the tuition fees are often determined based on the financial situation of the families. These admission policies can lead to very different outcomes.

Using Hungarian data, the authors find that a non-merit-based stable allocation could increase the number of assigned applicants by 1.9 per cent compared with merit-based stable allocations. In practical terms, this would mean around 1,500 additional students gaining admission.

This does not mean that universities should abandon merit-based funding. The study is careful not to offer a simple policy recipe. It also notes that alternative mechanisms raise incentive questions, since students may change how they report their preferences if they know that financial sensitivity affects the outcome.

What universities can learn

For higher education leaders, the broader message is clear: admissions design is also social policy. Algorithms do not simply process applications. They translate institutional priorities into real outcomes for students.

Universities should therefore evaluate admissions systems not only by whether they are transparent, stable or merit-based, but also by how they affect access, unused capacity and social mobility. Preference data can help institutions better understand how applicants make choices: whether they prioritise programme quality, location, funding, field of study or a combination of these factors.

A broader view of fairness

For universities and business schools, the paper is a reminder that fairness is not only about clear criteria. It is also about designing systems that reflect the diversity of student circumstances.

A well-designed admissions process can help institutions identify talent, use capacity responsibly and support social mobility. Biró Péter and his co-authors show that behind every seemingly technical admissions rule lies a choice about opportunity, equity and institutional mission.

The paper was published in The Review of Economics and Statistics, and it is available here.

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