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Self-confidence and unraveling in matching markets
[working paper]
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Wissenschaftszentrum Berlin für Sozialforschung gGmbH
Abstract We document experimentally how biased self-assessments affect the outcome of matching markets. In the experiments, we exogenously manipulate the self-confidence of participants regarding their relative performance by employing hard and easy real-effort tasks. We give participants the option to accep... view more
We document experimentally how biased self-assessments affect the outcome of matching markets. In the experiments, we exogenously manipulate the self-confidence of participants regarding their relative performance by employing hard and easy real-effort tasks. We give participants the option to accept early offers when information about their performance has not been revealed, or to wait for the assortative matching based on their actual relative performance. Early offers are accepted more often when the task is hard than when it is easy. We show that the treatment effect works through a shift in beliefs, i.e., underconfident agents are more likely to accept early offers than overconfident agents. The experiment identifies a behavioral determinant of unraveling, namely biased self-assessments, which can lead to penalties for underconfident individuals as well as efficiency losses.... view less
Keywords
experiment; self-confidence; market; labor market; self-assessment
Classification
Labor Market Research
Methods and Techniques of Data Collection and Data Analysis, Statistical Methods, Computer Methods
Free Keywords
C92; D47; D83; experiment; market unraveling; matching markets
Document language
English
Publication Year
2016
City
Berlin
Page/Pages
44 p.
Series
Discussion Papers / Wissenschaftszentrum Berlin für Sozialforschung, Forschungsschwerpunkt Markt und Entscheidung, Abteilung Verhalten auf Märkten, SP II 2016-210
Handle
http://hdl.handle.net/10419/148567
Status
Published Version; peer reviewed
Licence
Deposit Licence - No Redistribution, No Modifications