Friday, February 12, 2016

Federico Echenique and Juan Pereyra on unraveling of matching markets

 Strategic complementarities and unravelingin matching markets 
by Federico Echenique  and  Juan Sebasti├ín Pereyra, Theoretical Economics 11 (2016), 1–39

 Abstract: We present a theoretical explanation of inefficient early matching in matching markets. Our explanation is based on strategic complementarities and strategic unraveling. We identify a negative externality imposed on the rest of the market by agents who make early offers. As a consequence, an agent may make an early offer because she is concerned that others are making early offers. Yet other agents make early offers because they are concerned that others worry about early offers, and so on and so forth. The end result is that any given agent is more likely to make an early offer than a late offer.

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