Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/174926
Authors: 
Dizdar, Deniz
Moldovanu, Benny
Szech, Nora
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6803
Abstract: 
Agents in a finite two-sided market are matched assortatively, based on costly investments. Besides signaling private, complementary types, investments generate direct benefits for partners. We explore quantitative properties of the equilibrium investment behavior. The bilateral external benefits induce an investment multiplier effect. This multiplier effect depends in a complex way on agents’ uncertainty about their own rank and about the types and investments of potential partners. We characterize how the multiplier effect hinges on market size, and how it interacts with other important factors such as the costs of investment and the signaling incentives induced by competition.
Subjects: 
matching
signaling
investment
multiplier effect
JEL: 
C78
D44
D82
Document Type: 
Working Paper

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