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

We investigate strategic behavior in a centralized matching clearinghouse based on the Gale-Shapley deferred acceptance algorithm. To do so, we conduct a laboratory experiment to test the degree to which agents strategically misrepresent their preferences by submitting a "truncation" of their true preferences. Our experimental design uses a restricted environment in which a particular form of truncation is always a best response. We find that subjects do not truncate their preferences more often when truncation is profitable. They do, however, truncate their preferences less often when truncation is dangerous - that is, when there is a risk of "over-truncating" and remaining unmatched. Our findings suggest that behavioral insights can play an important role in the field of market design. (C) 2016 Elsevier Inc. All rights reserved.