Limited Strategic Thinking and the Cursed Match

Olivier Bochet and Jacopo Magnani

American Economic Journal: Microeconomics, 2024, vol. 16, issue 3, 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.

JEL-codes: C78 C91 D82 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/mic.20210344

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