Does Disappointment Aversion Explain Non-Truthful Reporting in Strategy-Proof Mechanisms?

Abstract

Disappointment aversion has been suggested as an explanation for non-truthful rankings in strategy-proof school-choice matching mechanisms. We test this hypothesis using a novel experimental design that eliminates important alternative causes of non-truthful rankings. The
design uses a simple contingent choice task with only two possible outcomes. Between two
treatments, we manipulate the possibility for disappointment aversion to have an effect on ranking.
We find a small and statistically marginally significant treatment effect in the direction
predicted by disappointment aversion. We therefore conclude that disappointment aversion is
a minor contributor to non-truthful rankings in strategy-proof school-choice matching mechanisms.

Keywords: matching, loss aversion, disappointment aversion, strategy-proofness, experiment, school choice, market design

JEL Classification: C72, C91, D47, D91