  Evidence suggests that participants in strategy-proof matching mechanisms
play dominated strategies. To explain the data, we introduce expectation-based
loss aversion into a school-choice setting and characterize choice-acclimating
personal equilibria. We find that non-truthful preference submissions can be
strictly optimal if and only if they are top-rank monotone. In equilibrium,
inefficiency or justified envy may arise in seemingly stable or efficient
mechanisms. Specifically, students who are more loss averse or less confident
than their peers obtain suboptimal allocations.
