Matching with noise and the acceptance curse

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27 Scopus citations

Abstract

This paper explores matching with both search and information frictions. Specifically, everyone observes only a noisy signal of the true type of any potential mate. In this context, matching decisions must incorporate not only information about a partner's attribute conveyed by the noisy signal, but also-as in the winner's curse in auction theory-information about a partner's type contained in his or her acceptance decision. We show that there exists an equilibrium exhibiting a stochastic positive assorting of types, generalizing [Becker, J. Polit. Economy 81 (1973) 813-846]. In equilibrium, selection is adverse: being accepted reduces an agent's estimate of a potential partner's type, a phenomenon that we call the acceptance curse effect.

Original languageEnglish (US)
Pages (from-to)81-113
Number of pages33
JournalJournal of Economic Theory
Volume129
Issue number1
DOIs
StatePublished - Jul 1 2006

Keywords

  • Adverse selection
  • Bayesian games
  • Matching
  • Search

ASJC Scopus subject areas

  • Economics and Econometrics

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