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Not quite the best response: truth-telling, strategy-proof matching, and the manipulation of others

Abstract

Following the advice of economists, school choice programs around the world have lately been adopting strategy-proof mechanisms. However, experimental evidence presents a high variation of truth-telling rates for strategy-proof mechanisms. We crash test the connection between the strategy-proofness of the mechanism and truth-telling. We employ a within-subjects design by making subjects take two simultaneous decisions: one with no strategic uncertainty and one with some uncertainty and partial information about the strategies of other players. We find that providing information about the out-of-equilibrium strategies played by others has a negative and significant effect on truth-telling rates. That is, most participants in our within-subjects design try and fail to best-respond to changes in the environment. We also find that more sophisticated subjects are more likely to play the dominant strategy (truth-telling) across all the treatments. These results have potentially important implications for the design of markets based on strategy-proof matching mechanisms.

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Notes

  1. Other noticeable experimental papers in the literature are Kagel and Roth (2000), Haruvy and Unver (2007), Echenique et al. (2016), Niederle and Yariv (2009), Featherstone and Mayefsky (2011), Chen and Kesten (2016), Hugh-Jones et al. (2014), Klijn et al. (2013), Hakimov and Kesten (2014), Niederle et al (2013), Featherstone and Niederle (2013), Braun et al. (2014).

  2. In a recent paper, Ding and Schotter (2014a, b) show that in a repeated environment chatting and intergenerational advice decrease the truth-telling of subjects. This evidence only supports our hypothesis of conditioning the strategies on the behavior of other players.

  3. Subjects are asked to fulfill rankings for both baseline and treatment in the same decision screen. Both rankings are submitted together.

  4. More precisely, subjects had three options: 55% chance of baseline to be payoff relevant and 45% chance of treatment, 50% chance for baseline and treatment and 45% chance for baseline and 55% chance for treatment. The vast majority of subjects chose 50–50.

  5. Note that the true top choice is a best response in the Baseline. Reporting the true top choice in any other position of the list is irrelevant for a payoff in the CBMT, and thus all submissions with this kind of manipulation are compatible with best response reporting. In all other treatments best response requires the full list to be reported truthfully.

  6. In Table 4 we report pairwise treatment comparisons. Note that the Baseline versus Treatment comparison are the within-subjects. Treatment versus Treatment comparisons are between-subjects.

  7. The highest truth-telling rates are found in experiments in which no information is provided about either the stated or underlying preferences.

  8. In the experiment, subjects were also asked the following question: The allocation procedure is constructed in such a way to guarantee students an assignment at least as good as their district school, according to the ranking list: True or False. However, we do not include the answers in our analysis, as a lot of subjects did not understand the formulation. In the post-experiment questionnaires subjects complained (those who answered incorrectly), that in fact you can get a worse school than your district school if you listed the worse school higher in the ranking lists. Thus, we concluded that the question was not clearly formulated and excluded it from our analysis.

  9. Thorough in relative terms: in the typical economic experiment subjects get just 15 min to read experimental instructions before they are asked to participate in incentive-based tasks. The training of participants in real-life market design tasks based on TTC is far less intense.

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Acknowledgements

We are grateful to Dorothea Kübler, Frank Heinemann, Bettina Klaus and Glenn Harrison for their kind comments and support; to Nina Bonge for helping us programming the experiments and conducting the sessions; and to Jennifer Rontganger for the copy editing.

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Correspondence to Rustamdjan Hakimov.

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Guillen, P., Hakimov, R. Not quite the best response: truth-telling, strategy-proof matching, and the manipulation of others. Exp Econ 20, 670–686 (2017). https://doi.org/10.1007/s10683-016-9505-0

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  • DOI: https://doi.org/10.1007/s10683-016-9505-0

Keywords

  • School choice
  • Top trading cycles
  • Strategy-proofness
  • Experiments
  • Matching