Lying through Their Teeth: Third Party Advice and Truth Telling in a Strategy Proof Mechanism

Abstract

We test the effect of advice on the well known top trading cycles (TTC) matching algorithm in a school choice frame work. We compare three treatments involving third party advice [right advice (R), wrong advice (W), and both right and wrong advice (RW)] to a no-advice baseline (B). In line with previous literature the truth telling rate is higher than 80% in the baseline, but it becomes as low as 35% in the W treatment. Truth telling rates are also significantly lower in R than in B, and much lower in RW than in B. This evidence suggests that a vast majority of participants in our experiment were confused. Truth telling seems to work only as a default strategy, and participants can be heavily influenced by advice. The real life implementation of matching mechanisms may have been misguided by some laboratory experimentation.