The limits of incentives in economic matching procedures

Avinatan Hassidim, Assaf Romm, Ran I. Shorrer

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

Organizations often require agents’ private information to achieve critical goals such as efficiency or revenue maximization, but frequently it is not in the agents’ best interest to reveal this information. Strategy-proof mechanisms give agents incentives to truthfully report their private information. In the context of matching markets, they eliminate agents’ incentives to misrepresent their preferences. We present direct field evidence of preference misrepresentation under the strategy-proof deferred acceptance in a high-stakes matching environment. We show that applicants to graduate programs in psychology in Israel often report that they prefer to avoid receiving funding, even though the mechanism preserves privacy and funding comes with no strings attached and constitutes a positive signal of ability. Surveys indicate that other kinds of preference misrepresentation are also prevalent. Preference misrepresentation in the field is associated with weaker applicants. Our findings have important implications for practitioners designing matching procedures and for researchers who study them.

Original languageEnglish (US)
Pages (from-to)951-963
Number of pages13
JournalManagement Science
Volume67
Issue number2
DOIs
StatePublished - Feb 2021

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research

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