Working Paper: CEPR ID: DP14103
Authors: Yair Antler; Benjamin Bachi
Abstract: We study a model of two-sided search in which agents' reasoning is coarse. In equilibrium, the most desirable agents behave as if they were fully rational, while, for all other agents, coarse reasoning results in overoptimism with regard to their prospects in the market. Consequently, they search longer than optimal. Moreover, agents with intermediate match values may search indefinitely while all other agents eventually marry. We show that the share of eternal singles converges monotonically to 1 as search frictions vanish. Thus, improvements in the search technology may backfire and even lead to market failure.
Keywords: boundedly rational; expectations; two-sided search; matching; dating; marriage market; coarse reasoning
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| search frictions (F12) | share of eternal singles (J12) |
| overoptimism about marriage prospects (J12) | agents search longer than optimal (L85) |
| search frictions vanish (F12) | share of eternal singles converges to 1 (F62) |
| improvements in search technology (O33) | exacerbate overselectiveness (D91) |
| agents overestimate potential partners' value and underestimate time to marry (C78) | agents become too selective to marry (J12) |
| technological advancements in search (O36) | market failure (D52) |