Mixed Strategies in Games of Capacity Manipulation in Hospital-Intern Markets

We investigate games of capacity manipulation in hospital-intern markets as proposed by Konishi and Ünver (Soc Choice Welfare, in press). While Konishi and Ünver (Soc Choice Welfare, in press) show that there may not exist a pure-strategy Nash equilibrium in general, there exists a mixed-strategy Nash equilibrium in such a game. We show that every hospital weakly prefers a Nash equilibrium to any “larger” capacity profiles, whether the equilibrium is in pure or mixed strategies. In particular, a Nash equilibrium is weakly preferred by hospitals to the outcome that results from truthful reporting.