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An experimental study on the incentives of the probabilistic serial mechanism

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  • Hugh-Jones, David
  • Kurino, Morimitsu
  • Vanberg, Christoph

Abstract

We report an experiment on the Probabilistic Serial (PS) mechanism for allocating indivisible goods. The PS mechanism, a recently discovered alternative to the widely used Random Serial Dictatorship mechanism, has attractive fairness and efficiency properties if people report their preferences truthfully. However, the mechanism is not strategy-proof, so participants may not truthfully report their preferences. We investigate misreporting in a set of simple applications of the PS mechanism. We confront subjects with situations in which the theory suggests that there is an incentive or no incentive to misreport. We find little misreporting in situations where misreporting is a Nash equilibrium. However, we also find a significant degree of misreporting in situations where there is actually no benefit to doing so. These findings suggest that the PS mechanism may have problems in terms of truthful elicitation.

Suggested Citation

  • Hugh-Jones, David & Kurino, Morimitsu & Vanberg, Christoph, 2014. "An experimental study on the incentives of the probabilistic serial mechanism," Games and Economic Behavior, Elsevier, vol. 87(C), pages 367-380.
  • Handle: RePEc:eee:gamebe:v:87:y:2014:i:c:p:367-380
    DOI: 10.1016/j.geb.2014.06.001
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    Cited by:

    1. Onur Kesten & Morimitsu Kurino & Alexander S. Nesterov, 2017. "Efficient lottery design," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 48(1), pages 31-57, January.
    2. repec:kap:expeco:v:20:y:2017:i:3:d:10.1007_s10683-016-9505-0 is not listed on IDEAS
    3. Guillen, Pablo & Hing, Alexander, 2014. "Lying through their teeth: Third party advice and truth telling in a strategy proof mechanism," European Economic Review, Elsevier, vol. 70(C), pages 178-185.
    4. Kesten, Onur & Kurino, Morimitsu & Nesterov, Alexander, 2015. "Efficient lottery design," Discussion Papers, Research Unit: Market Behavior SP II 2015-203, Social Science Research Center Berlin (WZB).
    5. Karl H.Schlag, 2015. "Who gives Direction to Statistical Testing? Best Practice meets Mathematically Correct Tests," Vienna Economics Papers 1512, University of Vienna, Department of Economics.
    6. Özgün Ekici & Onur Kesten, 2016. "An equilibrium analysis of the probabilistic serial mechanism," International Journal of Game Theory, Springer;Game Theory Society, vol. 45(3), pages 655-674, August.
    7. Guillen, Pablo & Hakimov, Rustamdjan, 2014. "Monkey see, monkey do: Truth-telling in matching algorithms and the manipulation of others," Discussion Papers, Research Unit: Market Behavior SP II 2014-202, Social Science Research Center Berlin (WZB).
    8. repec:syd:wpaper:2123/9951 is not listed on IDEAS

    More about this item

    Keywords

    Probabilistic serial mechanism; Incentives;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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