Truncation strategies in two-sided matching markets: Theory and experiment

We investigate strategic behavior in a centralized matching clearinghouse based on the GaleShapley deferred acceptance algorithm. To do so, we conduct a laboratory experiment to test whether agents strategically misrepresent their preferences by submitting a “truncation” of their true preferences. Our experimental design uses a restricted environment in which subjects always have a best-response in truncation strategies. We find that subjects do not truncate their preferences more often when truncation is profitable. They do, however, truncate less often when truncation is dangerous that is, when there is a risk of “over-truncating” and remaining unmatched. Our findings suggest that eliminating profitable opportunities for strategic behavior may not be sufficient to induce participants to report their true preferences. JEL codes: C78, C92, D47