Pre-match investment with frictions

doi:10.1016/j.geb.2009.06.004

Games and Economic Behavior

Volume 68, Issue 1, January 2010, Pages 23-34

https://doi.org/10.1016/j.geb.2009.06.004 Get rights and content

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.

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Cited by (0)

^☆: This work is based on Chapter 4 of my dissertation from the University of British Columbia. Thanks to participants in the 2008 Canadian Economics Association Meetings (Vancouver) and the Development, Institutions, Environment, and Trade lunch at UBC. Thanks for various valuable comments are especially due to Ken Jackson, Patrick Francois, Gorkem Celik, Phil Curry and two anonymous referees. All errors are mine.

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Pre-match investment with frictions☆

Abstract

J. Public Econ.

Rev. Econ. Dynam.

J. Econ. Theory

J. Econ. Theory

J. Econ. Behav. Organ.

Changes in unemployment and wage inequality: An alternative theory and some evidence

Amer. Econ. Rev.

A matching model with endogenous skill requirements

Int. Econ. Rev.

Employer learning and statistical discrimination

Quart. J. Econ.

Veblen effects in a theory of conspicuous consumption

Amer. Econ. Rev.

A theory of marriage: Part I

J. Polit. Economy

Public spending on education and the incentives for student achievement

Economica

Marriage and class

Quart. J. Econ.

Transplants and implants: The economics of self-improvement

Int. Econ. Rev.

Distribution of ability and earnings in a hierarchical job assignment model

J. Polit. Economy