The Mechanism Is Truthful, Why Aren't You?

Abstract

Honesty is the best policy in the face of a strategy-proof mechanism--irrespective of others' behavior, the best course of action is to report one's preferences truthfully. We review evidence from different markets in different countries and find that a substantial percentage of participants do not report their true preferences to the strategy-proof Deferred Acceptance mechanism. Two recurring correlates of preference misrepresentation are lower cognitive ability and the expectation of stronger competition. We evaluate possible explanations, which we hope will inform practicing market designers.