Pre-Matching Gambles

25 Pages Posted: 27 Feb 2014 Last revised: 7 Feb 2021

See all articles by Hanzhe Zhang

Hanzhe Zhang

Department of Economics, Michigan State University

Date Written: February 22, 2020

Abstract

This paper investigates pre-matching gambles and provides a new reason to gamble: matching concerns. Examples of pre-matching gambles include occupational choices before the marriage market, college major choices before the labor market, and portfolio management before attracting future clients in the financial market. I show that people make risky investments they would not have made if not for their subsequent participation in a competitive matching market. A fundamental and unique feature of the competitive matching market, which I call the competitive matching effect, induces gambling. The paper also illustrates the relationship between social efficiency and inequality in this setting, and shows how progressive taxation eliminates social inefficiency, reduces inequality, and generates government revenue.

Keywords: investment and matching, competitive matching effect, efficiency and inequality, progressive taxation

JEL Classification: C78, D31, J41

Suggested Citation

Zhang, Hanzhe, Pre-Matching Gambles (February 22, 2020). Games and Economic Behavior, Vol. 121, 76-89, 2020, Available at SSRN: https://ssrn.com/abstract=2401388 or http://dx.doi.org/10.2139/ssrn.2401388

Hanzhe Zhang (Contact Author)

Department of Economics, Michigan State University ( email )

486 West Circle Drive
East Lansing, MI 48824
United States

HOME PAGE: http://hanzhezhang.github.io/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
235
Abstract Views
1,734
rank
152,079
PlumX Metrics