One-sided learning about one's own type in a two-sided search model

Akiko Maruyama

No 15-26, GRIPS Discussion Papers from National Graduate Institute for Policy Studies

Abstract: This study analyzes a two-sided search model in which agents are vertically heterogeneous and agents on one side do not know their own type. Agents with imperfect self-knowledge update their beliefs based on the offers or rejections they receive from others. The results presented in this paper are as follows. An agent with imperfect self-knowledge lowers his or her reservation level if the agent receives a rejection that leads him or her to revise belief downward. However, an agent with imperfect self-knowledge does not raise his or her reservation level even if the agent receives an offer that leads to revise his or her belief upward. As a result, an agent with imperfect self-knowledge has the highest reservation level when he or she has just entered the market, and then a series of meetings gradually lowers his or her reservation level through the duration of the search.

Pages: 35 pages
Date: 2016-03
New Economics Papers: this item is included in nep-mic
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