Limited strategic thinking and the cursed match

In the publication American Economic Journal (2024, Volume 16, Issue 3), Olivier Bochet and Jacopo Magnani investigate critical dynamics within vertically differentiated matching markets in their paper, Limited Strategic Thinking and the Cursed Match. (https://doi.org/10.1257/mic.20210344).

This study examines the phenomenon known as the "acceptance curse," where being accepted by a potential partner is perceived as unfavorable information regarding one’s quality. By conducting experimental investigations, the authors explore whether individuals can anticipate this curse in environments characterized by private information.

Key findings include:

Lack of Strategic Response: The experiments reveal that participants generally do not appropriately adjust their strategies in response to changes in reservation values, showcasing limited strategic sophistication.
Importance of Out-of-Equilibrium Beliefs: The authors argue that participants' out-of-equilibrium beliefs significantly overshadow their conditional thinking, leading to a misunderstanding of adverse selection implications during partner evaluations.
Real-World Applications: The insights gained from this research underline the challenges individuals face in environments such as marriage and labor markets, where imperfect information can lead to mismatches and inefficiencies.

Our findings provide valuable insights into the psychological mechanisms that underpin decision-making in matching markets. Understanding the acceptance curse highlights the necessity for deeper exploration into how individuals navigate uncertainty and strategic interactions.

Olivier Bochet

Co-principal Investigator

This research not only contributes to the theoretical framework of strategic thinking in economics but also enhances our comprehension of how individuals process information in vital life choices, guiding future research in both economic theory and behavioral studies.

Authors

Olivier Bochet

NYU Abu Dhabi

Jacopo Magnani

Norwegian University of Science and Technology

New York University Abu Dhabi

Saadiyat Island

Abu Dhabi

United Arab Emirates

nyuad.cbid@nyu.edu

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