The effect of coarse reasoning on a search and matching market with transferable utility
Bibliographic Data
| ID | 7177137 |
|---|---|
| Authors | Ludvig Andersson (0009-0006-5056-0147, Lund University, corresponding author) |
| Year | 2025 |
| Volume | 240 |
| Pages | 107326-107326 |
| Publication date | 2025-11-21 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Journal of Economic Behavior & Organization (JOURNAL) |
| Journal identifiers | ISSN: 0167-2681 • E-ISSN: 1879-1751 |
| Publisher | Elsevier BV (PUBLISHER) |
| DOI | 10.1016/j.jebo.2025.107326 |
| OpenAlex | W4416443320 |
| Language | EN |
| References cited | 15 |
This paper studies a frictional search and matching market with transferable utility while relaxing the assumption of rational expectations. This is done by introducing bounded rationality in the form of analogy-based expectations equilibrium. I find that boundedly rational agents underestimate their prospects on the market. Consequently, they become impatient and willing to accept a larger set of matches. The resulting equilibrium outcome is characterized by greater mismatch than that with rational expectations. The effect of analogy-based expectations on equilibrium strategies is similar to the effect of search frictions. Hence, reducing the search frictions may dampen the negative effect induced by bounded rationality
| Highly cited | No |
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