Pre-match investment with frictions

Chris Bidner

Games and Economic Behavior, 2010, vol. 68, issue 1, 23-34

Abstract: The paper explores an environment in which agents are motivated to make unproductive investments with the sole aim of improving their matching opportunities. In contrast to existing work, I add frictions by allowing the investment to be imperfectly observed. The analysis allows for a deeper understanding of the trade-off inherent in related models: investments waste resources but facilitates more efficient matching patterns. I show that greater frictions i) do not always lead to inferior matching patterns, and ii) can force the economy into to a Pareto preferred equilibrium.

Keywords: Matching; Frictions; Premarital; investment; Signaling (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (10)

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