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An experimental study on decentralized networked markets

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  • Comola, Margherita
  • Fafchamps, Marcel

Abstract

We design a laboratory experiment to investigate matching in a decentralized market of deferred acceptance. Agents are undifferentiated and may have multiple partners; their payoff depends on who they match with. The experiment is designed in such a way that a stable configuration exists, but cannot be eyeballed by the participants due to the computational complexity of the game. In spite of this, subjects are remarkably good at reaching a stable match, even when the payoffs of others are not publicly observed. More information does, however, speed up convergence thanks to self-censoring. We trace irrational matching choices mostly to two sources: the tendency of over-think in a setting where strategic thinking is not necessary, and the reluctance to accept matching offers from those who have been disloyal in the past.

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  • Comola, Margherita & Fafchamps, Marcel, 2018. "An experimental study on decentralized networked markets," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 567-591.
    • Handle: RePEc:eee:jeborg:v:145:y:2018:i:c:p:567-591
    DOI: 10.1016/j.jebo.2017.10.013
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    Cited by:

    1. Carrillo, Juan D. & Gaduh, Arya, 2021. "Dynamics and stability of social and economic networks: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1144-1176.
    2. Joana Pais & Ágnes Pintér & Róbert F. Veszteg, 2020. "Decentralized matching markets with(out) frictions: a laboratory experiment," Experimental Economics, Springer;Economic Science Association, vol. 23(1), pages 212-239, March.
    3. Jinzhao Du & Ying Lei, 2022. "Information design of matching platforms when user preferences are bidimensional," Production and Operations Management, Production and Operations Management Society, vol. 31(8), pages 3320-3336, August.

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    More about this item

    Keywords

    Decentralized matching; Deferred acceptance; Information; Loyalty;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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