Targeted search in matching markets

Abstract

We propose a parsimonious matching model where a person's choice of whom to meet endogenizes the degree of randomness in matching. The analysis highlights the interaction between a productive motive, driven by the surplus attainable in a match, and a strategic motive, driven by reciprocity of interest of potential matches. We find that the interaction between these two motives differs with preferences—vertical versus horizontal—and that this interaction implies that preferences recovered using our model can look markedly different from those recovered using a model where the degree of randomness is not endogenous. We illustrate these results using data on the U.S. marriage market and show that the model can rationalize the finding of aspirational dating.