Abstract
Two prominent mechanisms in the random assignment problem are the random priority (RP) and the probabilistic serial (PS). When agents are truthful, the outcomes obtained under PS have superior efficiency and fairness properties, but unlike RP, PS is vulnerable to strategizing. We study incentives of agents under PS. We find that when agents strategize, in equilibrium an outcome may be obtained under PS which is not efficient or fair and which is worse in some respects than the RP outcome. The results of our equilibrium analysis of PS call for caution when implementing it in “small” assignment problems.
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