Preference Evolution under Stable Matching

We present a model that investigates preference evolution with endogenous matching. In the short run, individuals’ subjective preferences simultaneously determine who they are matched with and how they behave in the social interactions with their matched partners, which results in material payoffs for them. Material payoffs in turn affect how preferences evolve in the long run. To properly model the “match-to-interact” process, we combine stable matching and equilibrium concepts. Our findings emphasize the importance of parochialism, a preference for matching with one’s own kind, in shaping our results. Under complete information, the parochial efficient preference type— characterized by a weak form of parochialism and a preference for efficiency—stands out in the evolutionary process, because it is able to force positive assortative matching and efficient play among individuals carrying this preference type. Under incomplete information, the exclusionary efficient preference type—characterized by a stronger form of parochialism and a preference for efficiency—prevails, as it provides individuals with an incentive to engage in self-sorting through rematching in any matching outcomes that involve incomplete information and inefficient play