Unraveling of Dynamic Sorting
AbstractWe consider a two-sided, finite-horizon search and matching model with heterogeneous types and complementarity between types. The quality of the pool of potential partners deteriorates as agents who have found mutually agreeable matches exit the market. When search is costless and all agents participate in each matching round, the market performs a sorting function in that high types of agents have multiple chances to match with their peers. However, this sorting function is lost if agents incur an arbitrarily small cost in order to participate in each round. With a sufficiently rich type space, the market unravels as almost all agents rush to participate in the first round and match and exit with anyone they meet
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 Latin American Meetings with number 72.
Date of creation: 11 Aug 2004
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Random matching; Search externality; Endogenous participation; Complementarity;
Other versions of this item:
- Ettore Damiano & Hao Li, 2004. "Unraveling of Dynamic Sorting," 2004 Meeting Papers 174, Society for Economic Dynamics.
- Damiano, Ettore & Li, Hao & Suen, Wing, 2004. "Unraveling of Dynamic Sorting," Microeconomics.ca working papers damiano-04-08-11-03-02-02, Vancouver School of Economics, revised 11 Aug 2004.
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-16 (All new papers)
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