An experimental study on strategic preference formation in two-sided matching markets

We experimentally evaluate the worker-proposing deferred acceptance mechanism (DA) in matching markets between workers and firms. Specifically, we ask how sequencing decisions and the strategy of the receivers' side of the matching market affect the proposers' side strategy of submitting preferences. As observed in entry-level labor markets, firms do not want workers to reject their job offers. We capture this tendency among firms through the skipping-down strategy they employ after learning workers' submitted rank-order lists, in which a firm prioritizes workers who give it a higher ranking. We conduct an experiment consisting of two treatments of DA where human subjects play the role of workers. Treatments differ in the strategy of automated firms: the truth-telling or the skipping-down strategy. The experiment confirms that the treatment affects workers' preference formation. The degree of stability is lower when firms follow the skipping-down strategy. Moreover, across treatments, we show that most untruthful rank-ordered lists submitted by workers can be explained by a new pattern of behavior called the compromise strategy, which has been reported in the individual decision-making context; that is, if there is an extreme option, workers will tend to prefer the in-between option.