American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Limited Strategic Thinking and the Cursed Match
American Economic Journal: Microeconomics
(pp. 321–44)
Abstract
In vertically differentiated matching markets with private information, agents face an acceptance curse: being accepted as a partner conveys bad news. We experimentally investigate whether individuals anticipate the acceptance curse in such an environment. We test the effect of an exogenous change in reservation values, making some types more selective and inducing significant changes in the posterior distribution of match qualities. Consistent with limited strategic sophistication, subjects don't respond to this manipulation. Through additional investigation and structural estimations, we suggest a mechanism explaining the lack of subjects' response: out-of-equilibrium beliefs are quantitatively more important than limited conditional thinking.Citation
Bochet, Olivier, and Jacopo Magnani. 2024. "Limited Strategic Thinking and the Cursed Match." American Economic Journal: Microeconomics 16 (3): 321–44. DOI: 10.1257/mic.20210344Additional Materials
JEL Classification
- C78 Bargaining Theory; Matching Theory
- C91 Design of Experiments: Laboratory, Individual
- D82 Asymmetric and Private Information; Mechanism Design