DISCRIMINATION IN TWO-SIDED MATCHING MARKET: EXPERIMENTAL AND THEORETICAL EVIDENCE IN ENTREPRENEURIAL FINANCE *

73 Pages Posted: 4 Apr 2022 Last revised: 30 Apr 2024

See all articles by Junlong Feng

Junlong Feng

Hong Kong University of Science & Technology (HKUST)

Ye Zhang

Stockholm School of Economics - Finance Department

Weijie Zhong

Columbia University, Graduate School of Arts and Sciences, Department of Economics

Ofir Gefen

National University of Singapore (NUS) - NUS Business School

Date Written: March 23, 2022

Abstract

This paper explores statistical discrimination within two-sided matching markets, focusing specifically on the entrepreneurial financing market. Through an experiment involving real US startup founders, we first identify the presence of statistical discrimination against female investors among startup founders. Specifically, female investors' signals are perceived as less informative compared to those of male investors. This discrimination is predominantly driven by male founders and disproportionately affects high-quality female investors, suggesting the existence of gender homophily and a "glass ceiling" for women in this context. Building upon these experimental findings, we develop a novel search-and-matching model with endogenous information aggregation and belief formation. This theoretical framework explains how statistical discrimination can arise endogenously within two-sided matching markets, leading to the observed glass ceiling distributional effect and perpetuating a persistent low female investor participation rate in equilibrium.

Keywords: Discrimination, Two-sided Matching, Experiment, Entrepreneurship JEL Classification: C78, C93, D83, G24, J16, J71, L26

JEL Classification: C78, C93, D83, G40, G24, J15, J16, J71

Suggested Citation

Feng, Junlong and Zhang, Ye and Zhong, Weijie and Gefen, Ofir, DISCRIMINATION IN TWO-SIDED MATCHING MARKET: EXPERIMENTAL AND THEORETICAL EVIDENCE IN ENTREPRENEURIAL FINANCE * (March 23, 2022). Available at SSRN: https://ssrn.com/abstract=4065009 or http://dx.doi.org/10.2139/ssrn.4065009

Junlong Feng

Hong Kong University of Science & Technology (HKUST)

Ye Zhang (Contact Author)

Stockholm School of Economics - Finance Department ( email )

Stockholm
Sweden

HOME PAGE: http://https://www.yezhang.space/

Weijie Zhong

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

HOME PAGE: http://www.columbia.edu/~wz2269

Ofir Gefen

National University of Singapore (NUS) - NUS Business School ( email )

15 Kent Ridge Dr
Singapore, 129800
Singapore

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