Strategic Experimentation with Random Serial Dictatorship

Abstract

We consider matching-mechanism design in an environment in which agents acquire information about their preferences endogenously. Information is costly; thus, agents acquire information only if it is relevant to their decision-making. Agents' beliefs about their choice set (i.e., the set of objects each agent can obtain) are therefore crucial for incentives in information acquisition. This study demonstrates that the implementation of matching mechanisms changes the equilibrium consequence because it influences agents' beliefs about choice sets. We analyze the behavior of the random serial dictatorship mechanism in a stylized environment. We show that the full-disclosure policy (which corresponds to sequential implementation) is typically Pareto inefficient because it fails to exploit the positive externality of information acquisition. We induce more efficient information acquisition through information design.