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 language | English (US) |
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Pages (from-to) | 81-113 |
Number of pages | 33 |
Journal | Journal of Economic Theory |
Volume | 129 |
Issue number | 1 |
DOIs | |
State | Published - Jul 1 2006 |
Keywords
- Adverse selection
- Bayesian games
- Matching
- Search
ASJC Scopus subject areas
- Economics and Econometrics