Experimental Economics Seminar for November 7

Events, Seminars | November 4, 2014

Join us for the next ICES Experimental Economics Seminar of the semester, featuring Alex Rees-Jones.

Professor Rees-Jones, of the University of Pennsylvania, will discuss his paper When “Strategy” Hurts: Suboptimal Behavior in Strategy-Proof Mechanisms (abstract). The talk will take place on Friday, November 7, from 4:00 to 5:00pm, in room 5075 of the Metropolitan Building, Arlington campus.

Visit the Seminar schedule to access the paper and to learn more about upcoming speakers.

Abstract

The literature on two-sided matching markets has devoted significant attention to “strategy-proof” mechanisms—that is, mechanisms which eliminate the possibility for gain from strategic misrepresentation of preferences. Under the assumption that participants respond optimally to the designed incentive scheme, these mechanisms permit the observation of true preferences and avoid the implicit punishment of market participants who do not try to “game the system.” This paper studies if these potential benefits are fully realized, and explores the consequences if they are not. Using new data from a flagship field application of the matching literature—the medical residency match—I find that most students respond optimally by truthfully revealing their preferences. However, some students appear to pursue futile attempts at “strategic” behavior. I document the nature of this apparent suboptimal behavior, and theoretically explore its consequences for all market participants. These results inform the assessment of the costs and benefits of the deferred acceptance algorithm, and highlight general challenges faced in mechanism and experimental design.

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