A Model of Partnership Formation with Friction and Multiple Criteria - Search Theory: A Game Theoretic Perspective - page 255

Chapter 17
A Model of Partnership Formation with Friction
and Multiple Criteria
Stephen Kinsella and David M. Ramsey
Abstract We present a game theoretical sequential search problem modelling
partnership formation based on two discrete character traits. There are two classes
of individual. Each individual observes a sequence of potential partners from the
other class. The traits are referred to as attractiveness and character, respectively.
All individuals prefer partners of high attractiveness and similar character. Attrac-
tiveness can be measured instantly. However, in order to observe the character of an
individual, a costly interview (or date) is required. On observing the attractiveness
of a prospective partner, an individual must decide whether he/she wishes to proceed
to the interview stage. During the interview phase, the prospective pair observe each
other's character and then decide whether they wish to form a pair. Mutual accep-
tance is required for both an interview to occur and a pair to form. An individual
stops searching on finding a partner. A set of criteria based on the concept of a trem-
bling hand perfect equilibrium is used to define an equilibrium of this game. It is ar-
gued that under such a general formulation there may be multiple equilibria. For this
reason, we define a specific formulation of the game, the so called symmetric ver-
sion, which has a unique symmetric equilibrium. The form of this equilibrium has
some similarities to the block separating equilibrium derived for classical models of
two-sided mate choice and job search problems, but is essentially different.