The Secure Boston Mechanism: theory and experiments

• Published in: Experimental economics : a journal of the Economic Science Association 2019-12, Vol.22 (4), p.918-953
• Main Authors: Dur, Umut, Hammond, Robert G., Morrill, Thayer
• Format: Article
• Language: English
• Subjects: Algorithms; Ambiguity; Behavioral/Experimental Economics; Economic theory; Economic Theory/Quantitative Economics/Mathematical Methods; Economics; Economics and Finance; Economists; Game Theory; Microeconomics; Operations Research/Decision Theory; Original Paper; Pareto optimum; School choice; Simulation; Social and Behav. Sciences
• ISSN: 1386-4157; 1573-6938
• DOI: 10.1007/s10683-018-9594-z

This paper introduces a new matching mechanism that is a hybrid of the two most common mechanisms in school choice, the Boston Mechanism (BM) and the Deferred Acceptance algorithm (DA). BM is the most commonly used mechanism in the field, but it is neither strategyproof nor fair. DA is the mechanism that is typically favored by economists, but it is not Pareto efficient. The new mechanism, the Secure Boston Mechanism (sBM), is an intuitive modification of BM that secures any school a student was initially guaranteed but otherwise prioritizes a student at a school based upon how she ranks it. Relative to BM, theoretical results suggest that sBM is an improvement in terms of strategyproofness and fairness. We present experimental evidence using a novel experimental design that confirms that sBM significantly increases truth-telling and fairness. Relative to DA, theoretical results suggest that sBM can be a Pareto improvement in equilibrium but the efficiency comparison of sBM and DA is theoretically ambiguous. We present simulation evidence that suggests that sBM often does Pareto dominate DA when DA is inefficient, while sBM and DA very often overlap when DA is efficient. Overall, our results strongly support the use of sBM over BM and suggest that sBM should be considered as a viable alternative to DA.