Deferred acceptance and regret-free truth-telling

Abstract

The deferred acceptance mechanism has been widely adopted across centralized matching markets, despite the fact that it provides participants with opportunities to “game the system.” Accounting for the lack of information that participants typically have in these markets in practice, I introduce a new notion of behavior under uncertainty that captures participants’ aversion to experience regret. I show that participants optimally choose not to manipulate the deferred acceptance mechanism in order to avoid regret. Moreover, the deferred acceptance mechanism is the unique mechanism within an interesting class (quantile-stable) to induce honesty from participants in this way.