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Pre-match investment with frictions

Author

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  • Bidner, Chris
Abstract
The paper explores an environment in which agents are motivated to make unproductive investments with the sole aim of improving their matching opportunities. In contrast to existing work, I add frictions by allowing the investment to be imperfectly observed. The analysis allows for a deeper understanding of the trade-off inherent in related models: investments waste resources but facilitates more efficient matching patterns. I show that greater frictions i) do not always lead to inferior matching patterns, and ii) can force the economy into to a Pareto preferred equilibrium.

Suggested Citation

  • Bidner, Chris, 2010. "Pre-match investment with frictions," Games and Economic Behavior, Elsevier, vol. 68(1), pages 23-34, January.
    • Handle: RePEc:eee:gamebe:v:68:y:2010:i:1:p:23-34
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    References listed on IDEAS

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    Cited by:

    1. Georg Nöldeke & Larry Samuelson, 2015. "Investment and Competitive Matching," Econometrica, Econometric Society, vol. 83(3), pages 835-896, May.
    2. Bilancini, Ennio & Boncinelli, Leonardo, 2014. "Instrumental cardinal concerns for social status in two-sided matching with non-transferable utility," European Economic Review, Elsevier, vol. 67(C), pages 174-189.
    3. Chris Bidner & John Knowles, 2018. "Matching for Social Mobility with Unobserved Heritable Characteristics," Discussion Papers dp18-05, Department of Economics, Simon Fraser University.
    4. Herrenbrueck, Lucas & Xia, Xiaoyu & Eastwick, Paul & Hui, Chin Ming, 2018. "Smart-dating in speed-dating: How a simple Search model can explain matching decisions," European Economic Review, Elsevier, vol. 106(C), pages 54-76.
    5. Seungjin Han, 2019. "Pre-Match Investment Competition with Bounded Transfers," Department of Economics Working Papers 2019-01, McMaster University.
    6. Chris Bidner & Guillaume Roger & Jessica Moses, 2016. "Investing in Skill and Searching for Coworkers: Endogenous Participation in a Matching Market," American Economic Journal: Microeconomics, American Economic Association, vol. 8(1), pages 166-202, February.
    7. Zhang, Hanzhe, 2020. "Pre-matching gambles," Games and Economic Behavior, Elsevier, vol. 121(C), pages 76-89.

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