Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5072440 | Games and Economic Behavior | 2010 | 12 Pages |
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.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Chris Bidner,