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Unraveling of Dynamic Sorting


  • Ettore Damiano
  • Hao Li


We 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

Suggested Citation

  • Ettore Damiano & Hao Li, 2004. "Unraveling of Dynamic Sorting," Econometric Society 2004 Latin American Meetings 72, Econometric Society.
  • Handle: RePEc:ecm:latm04:72

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    References listed on IDEAS

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    Cited by:

    1. Alvin Roth, 2008. "Deferred acceptance algorithms: history, theory, practice, and open questions," International Journal of Game Theory, Springer;Game Theory Society, vol. 36(3), pages 537-569, March.
    2. E. M. Parilina & A. Tampieri, 2013. "Marriage Formation with Assortative Meeting as a Two-Sided Optimal Stopping Problem," Working Papers wp886, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. Echenique, Federico & Pereyra, Juan Sebastián, 2016. "Strategic complementarities and unraveling in matching markets," Theoretical Economics, Econometric Society, vol. 11(1), January.
    4. Dargnies, Marie-Pierre & Hakimov, Rustamdjan & Kübler, Dorothea, 2016. "Self-confidence and unraveling in matching markets," Discussion Papers, Research Unit: Market Behavior SP II 2016-210, Social Science Research Center Berlin (WZB).
    5. Ettore Damiano & Li Hao, 2008. "Competing Matchmaking," Journal of the European Economic Association, MIT Press, vol. 6(4), pages 789-818, June.
    6. Bos, Olivier & Ranger, Martin, 2016. "Risk and Unraveling in Labor Markets," MPRA Paper 74785, University Library of Munich, Germany.
    7. Fainmesser, Itay P., 2013. "Social networks and unraveling in labor markets," Journal of Economic Theory, Elsevier, vol. 148(1), pages 64-103.
    8. Jonathan M.V. Davis, 2017. "The Short and Long Run Impacts of Centralized Clearinghouses: Evidence from Matching Teach For America Teachers to Schools," 2017 Papers pda791, Job Market Papers.
    9. Ettore Damiano & Hao Li, 2007. "Price discrimination and efficient matching," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(2), pages 243-263, February.
    10. Halaburda, Hanna, 2010. "Unravelling in two-sided matching markets and similarity of preferences," Games and Economic Behavior, Elsevier, vol. 69(2), pages 365-393, July.
    11. Aloysius Siow, 2015. "Testing Becker's Theory of Positive Assortative Matching," Journal of Labor Economics, University of Chicago Press, vol. 33(2), pages 409-441.
    12. Muriel Niederle & Alvin E. Roth & M. Utku Ünver, 2013. "Unraveling Results from Comparable Demand and Supply: An Experimental Investigation," Games, MDPI, Open Access Journal, vol. 4(2), pages 1-40, June.
    13. Josephson, Jens & Shapiro, Joel, 2008. "Interviews and Adverse Selection," CEPR Discussion Papers 6837, C.E.P.R. Discussion Papers.
    14. Frederick Chen, 2003. "Unraveling in a dynamic matching market with Nash bargaining," Economics Bulletin, AccessEcon, vol. 3(17), pages 1-6.
    15. De Fraja, Gianni & Sákovics, József, 2012. "Exclusive nightclubs and lonely hearts columns: Non-monotone participation in optional intermediation," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 618-632.
    16. Wu, Mingqin & Chen, Bin, 2016. "Assignment of provincial officials based on economic performance: Evidence from China," China Economic Review, Elsevier, vol. 38(C), pages 60-75.
    17. Alvin E. Roth, 2012. "Marketplace Institutions Related to the Timing of Transactions: Reply to Priest," Journal of Labor Economics, University of Chicago Press, vol. 30(2), pages 479-494.
    18. Sjaak Hurkens & Nir Vulkan, 2015. "Dynamic matching and bargaining with heterogeneous deadlines," International Journal of Game Theory, Springer;Game Theory Society, vol. 44(3), pages 599-629, August.
    19. Burhan, Nik Ahmad Sufian & Sidek, Abdul Halim & Kurniawan, Yohan & Mohamad, Mohd Rosli, 2014. "Has Globalization Triggered Collective Impact of National Intelligence on Economic Growth?," MPRA Paper 77316, University Library of Munich, Germany.

    More about this item


    Random matching; Search externality; Endogenous participation; Complementarity;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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