Loss aversion in strategy-proof school-choice mechanisms

Vincent Meisner and Jonas von Wangenheim

Papers from arXiv.org

Abstract: Evidence suggests that participants in strategy-proof matching mechanisms play dominated strategies. To explain the data, we introduce expectation-based loss aversion into a school-choice setting and characterize choice-acclimating personal equilibria. We find that non-truthful preference submissions can be strictly optimal if and only if they are top-rank monotone. In equilibrium, inefficiency or justified envy may arise in seemingly stable or efficient mechanisms. Specifically, students who are more loss averse or less confident than their peers obtain suboptimal allocations.

Date: 2022-07
New Economics Papers: this item is included in nep-des, nep-upt and nep-ure
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