Learning about one’s own type in two-sided search

This paper is an analysis of a two-sided search model in which agents are vertically heterogeneous and some agents do not know their own types. Agents who do not know their own types update their beliefs about their own types through the offers or rejections that they receive from others. In the belief-updating process, an agent who is unsure of his or her own type frequently behaves as an over- or underconfident agent. In this paper, we show that this apparent over- or underconfidence influences both on the individual’s and other agents’ matching behaviors. We show, especially, that the apparent overconfidence of some agents prevents the lowest-type agents from matching in an equilibrium.