Fox Hsu Yang (2015) - Unobserverd Heterogeneity in Matching Games with an Application to Venture Capital

Random notes

If matching based on observed characteristics is found to be important, it is a reasonable conjecture that matching based on unobserved characteristics is also important. This paper investigates what data on the sorting patterns between agents can tell us about the distributions of unobserved agent characteristics relevant for sorting.

Foundations:

• We use data on many markets with finite numbers of players and different realizations of observables and unobservables in each market.
• We require at least one continuous, observable per match or per agent.
• In the baseline transferable utility matching game, the primitive that governs sorting is the matrix that collects the production values for each potential match in a matching market.
• Our key assumption is that the production level of each match is additively-separable in observable and unobservable terms.