Matching with noise and the acceptance curse |
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Authors: | Hector Chade |
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Institution: | Department of Economics, Arizona State University, P.O. Box 873806, Tempe, AZ 85287-3806, USA |
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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. |
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Keywords: | D82 D83 |
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