Why Do Some Clearinghouses Yield Stable Outcomes? Experimental Evidence on Out-of-Equilibrium Truth-Telling∗

When matching mechanisms yield unstable assignments, unraveling can lead participants to abandon them. This is thought to explain why, empirically, the stable Deferred Acceptance (DA) mechanism persists where unstable alternatives, such as priority mechanisms, do not. Theory, however, tells us that both DA and priority mechanisms can yield unstable matches in incomplete information equilibrium. Nonetheless, if match participants on the proposed-to side deviate from equilibrium by truth-telling, then DA yields stable outcomes. In an experiment, we find such behavior under DA (but not under a priority mechanism). This suggests that out-of-equilibrium truth-telling might help to explain the success of DA. JEL: C78, C92, D02