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Self-confidence and unraveling in matching markets

Author

Listed:
  • Marie-Pierre Dargnies

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Rustamdjan Hakimov

    (WZB - Social Science Research Center Berlin - Social Science Research Center Berlin)

  • Dorothea Kübler

    (WZB - Social Science Research Center Berlin - Social Science Research Center Berlin)

Abstract

We document experimentally how biased self-assessments affect the outcome of matching markets. In the experiments, we exogenously manipulate the self-confidence of participants regarding their relative performance by employing hard and easy real-effort tasks. We give participants the option to accept early offers when information about their performance has not been revealed, or to wait for the assortative matching based on their actual relative performance. Early offers are accepted more often when the task is hard than when it is easy. We show that the treatment effect works through a shift in beliefs,i.e., underconfident agents are more likely to accept early offers than overconfident agents. The experiment identifies a behavioral determinant of unraveling, namely biased self-assessments, which can lead to penalties for underconfident individuals as well as efficiency losses.

Suggested Citation

  • Marie-Pierre Dargnies & Rustamdjan Hakimov & Dorothea Kübler, 2019. "Self-confidence and unraveling in matching markets," Post-Print hal-02059282, HAL.
  • Handle: RePEc:hal:journl:hal-02059282
    DOI: 10.1287/mnsc.2018.3201
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    Cited by:

    1. Kai Barron & Christina Gravert, 2022. "Confidence and Career Choices: An Experiment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(1), pages 35-68, January.
    2. Comola, Margherita & Fafchamps, Marcel, 2018. "An experimental study on decentralized networked markets," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 567-591.
    3. Thomas (T.) Buser & Noemi Peter & Stefan Wolter, 2017. "Gender, Willingness to Compete and Career Choices Along the Whole Ability Distribution," Tinbergen Institute Discussion Papers 17-081/I, Tinbergen Institute.
    4. Alex Rees-Jones & Ran Shorrer & Chloe J. Tergiman, 2020. "Correlation Neglect in Student-to-School Matching," NBER Working Papers 26734, National Bureau of Economic Research, Inc.
    5. In'acio B'o & Li Chen & Rustamdjan Hakimov, 2023. "Strategic Responses to Personalized Pricing and Demand for Privacy: An Experiment," Papers 2304.11415, arXiv.org.
    6. Barron, Kai & Gravert, Christina, 2018. "Beliefs and actions: How a shift in confidence affects choices," MPRA Paper 84743, University Library of Munich, Germany.
    7. Pan, Siqi, 2019. "The instability of matching with overconfident agents," Games and Economic Behavior, Elsevier, vol. 113(C), pages 396-415.
    8. Dargnies, Marie-Pierre & Hakimov, Rustamdjan & Kübler, Dorothea, 2022. "Aversion to hiring algorithms: Transparency, gender profiling, and self-confidence," Discussion Papers, Research Unit: Market Behavior SP II 2022-202, WZB Berlin Social Science Center.
    9. Erkal, Nisvan & Gangadharan, Lata & Koh, Boon Han, 2020. "Replication: Belief elicitation with quadratic and binarized scoring rules," Journal of Economic Psychology, Elsevier, vol. 81(C).
    10. Katharina Dowling & Lucas Stich & Martin Spann, 2021. "An experimental analysis of overconfidence in tariff choice," Review of Managerial Science, Springer, vol. 15(8), pages 2275-2297, November.
    11. Thomas Buser & Noemi Peter & Stefan C. Wolter, 2022. "Willingness to compete, gender and career choices along the whole ability distribution," Experimental Economics, Springer;Economic Science Association, vol. 25(5), pages 1299-1326, November.
    12. Hakimov, Rustamdjan & Kübler, Dorothea, 2021. "Experiments on centralized school choice and college admissions: a survey," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 24(2), pages 434-488.
    13. Vincent Meisner, 2023. "Report-Dependent Utility and Strategy-Proofness," Management Science, INFORMS, vol. 69(5), pages 2733-2745, May.
    14. Benjamin N. Roth & Ran I. Shorrer, 2021. "Making Marketplaces Safe: Dominant Individual Rationality and Applications to Market Design," Management Science, INFORMS, vol. 67(6), pages 3694-3713, June.
    15. David Danz & Lise Vesterlund & Alistair J. Wilson, 2020. "Belief Elicitation: Limiting Truth Telling with Information on Incentives," NBER Working Papers 27327, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Market unraveling; experiment; self-confidence; matching markets;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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