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Pre-match investment with frictions

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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.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 68 (2010)
Issue (Month): 1 (January)
Pages: 23-34

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Handle: RePEc:eee:gamebe:v:68:y:2010:i:1:p:23-34

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Matching Frictions Premarital investment Signaling;

References

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Cited by:
  1. Ennio Bilancini & Leonardo Boncinelli, 2014. "Instrumental Cardinal Concerns for Social Status in Two-Sided Matching with Non-Transferable Utility," Center for Economic Research (RECent) 095, University of Modena and Reggio E., Dept. of Economics.

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