Truthtelling in Matching Markets
28 Pages Posted: 31 Oct 2017
Date Written: October 2017
We analyze a search and matching model with non‐transferable utility and asymmetric information. Randomly paired agents go through an evaluation phase, at the end of which they discover each other's types and choose to match or not. Before deciding to enter this phase, agents can communicate through cheap talk. We provide conditions for this communication to be informative, and we examine how it affects agents' welfare. We show that communication is Pareto‐improving only when the matching is assortative in the absence of communication and left unchanged by information transmission.
Keywords: Cheap talk, marriage, matching; search
JEL Classification: C72, C78, D82, D83, J64
Suggested Citation: Suggested Citation