Discussion Paper Details

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Title: Searching Forever After

Author(s): Yair Antler and Benjamin Bachi

Publication Date: November 2019

Keyword(s): Boundedly rational expectations, Coarse reasoning, Dating, Marriage Market, Matching and Two-sided search

Programme Area(s): Industrial Organization

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.

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Bibliographic Reference

Antler, Y and Bachi, B. 2019. 'Searching Forever After'. London, Centre for Economic Policy Research.