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Limited Strategic Thinking and the Cursed Match

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  • Olivier Bochet
  • Jacopo Magnani

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.

Suggested Citation

  • Olivier Bochet & Jacopo Magnani, 2024. "Limited Strategic Thinking and the Cursed Match," American Economic Journal: Microeconomics, American Economic Association, vol. 16(3), pages 321-344, August.
    • Handle: RePEc:aea:aejmic:v:16:y:2024:i:3:p:321-44
    DOI: 10.1257/mic.20210344
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    References listed on IDEAS

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    1. Jacob K. Goeree & Charles A. Holt & Thomas R. Palfrey, 2016. "Quantal Response Equilibrium:A Stochastic Theory of Games," Economics Books, Princeton University Press, edition 1, number 10743.
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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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