DOI link to open access article:
Strategy-Proofness of Stochastic Assignment Mechanisms
Journal of Mechanism and Institution Design
Volume 3, issue 1, pages 17-50 (December 2018)
This paper seeks to identify which algorithm to employ in a situation where goods are distributed to individuals without using money, while treating everyone equally and respecting each individual's preferences. I compare two stochastic assignment mechanisms: Random serial dictatorship (RSD) and top trading cycles with random endowments (TTC). In standard theory, both algorithms are strategy-proof and yield the optimal result. In the experiment, RSD outperforms TTC. This can be attributed to a more dominant strategy play under RSD. Generally, subjects with extremely high and low levels of contingent reasoning play their dominant strategies. These results suggest that one optimal algorithm may outperform another one if individuals are boundedly rational.
Keywords: Market design, mechanism design, randomization.
JEL Classification Numbers: C78, C92, D47.