Skip to main content

LUP Student Papers

LUND UNIVERSITY LIBRARIES

The Effect of Coarse Reasoning on a Search and Matching Market With Transferable Utility

Andersson, Ludvig LU (2020) NEKN01 20201
Department of Economics
Abstract
This thesis investigates the effect of relaxing the assumption of full rationality on a frictional search and matching market with transferable utilities. It has previously been shown that such markets without transferable utilities may exhibit agents searching for a matching partner for longer than optimal due to them overestimating their prospects on the market. Reduced search frictions further enhance this negative effect. I find in this thesis that this is not the case for markets with transferable utility. Instead, agents become impatient and willing to accept larger set of matches, which is a result of them underestimating their prospects on the market. The equilibrium outcome with bounded rationality is less efficient than that with... (More)
This thesis investigates the effect of relaxing the assumption of full rationality on a frictional search and matching market with transferable utilities. It has previously been shown that such markets without transferable utilities may exhibit agents searching for a matching partner for longer than optimal due to them overestimating their prospects on the market. Reduced search frictions further enhance this negative effect. I find in this thesis that this is not the case for markets with transferable utility. Instead, agents become impatient and willing to accept larger set of matches, which is a result of them underestimating their prospects on the market. The equilibrium outcome with bounded rationality is less efficient than that with full rationality. With transferable utility and boundedly rational agents, reduced search frictions may reduce the suboptimality implied by the boundedly rational agents’ equilibrium behaviour. (Less)
Please use this url to cite or link to this publication:
author
Andersson, Ludvig LU
supervisor
organization
course
NEKN01 20201
year
type
H1 - Master's Degree (One Year)
subject
keywords
Search Theory, Assortative Matching, Bounded Rationality, Transferable Utility, Matching Theory
language
English
id
9014418
date added to LUP
2020-08-29 10:34:51
date last changed
2020-08-29 10:34:51
@misc{9014418,
  abstract     = {{This thesis investigates the effect of relaxing the assumption of full rationality on a frictional search and matching market with transferable utilities. It has previously been shown that such markets without transferable utilities may exhibit agents searching for a matching partner for longer than optimal due to them overestimating their prospects on the market. Reduced search frictions further enhance this negative effect. I find in this thesis that this is not the case for markets with transferable utility. Instead, agents become impatient and willing to accept larger set of matches, which is a result of them underestimating their prospects on the market. The equilibrium outcome with bounded rationality is less efficient than that with full rationality. With transferable utility and boundedly rational agents, reduced search frictions may reduce the suboptimality implied by the boundedly rational agents’ equilibrium behaviour.}},
  author       = {{Andersson, Ludvig}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Effect of Coarse Reasoning on a Search and Matching Market With Transferable Utility}},
  year         = {{2020}},
}