Preference Evolution under Partner Choice

Abstract: We present a model that investigates preference evolution with endogenous matching. In the short run, individuals' subjective preferences influence partner selection and behavior in strategic interactions, which affect their material payoffs. These payoffs, in turn, determine how preferences evolve in the long run. To properly model the "match-to-interact" process, we combine stable matching and equilibrium concepts. Our analysis shows that endogenous matching gives rise to the evolutionary stability of a class of preferences that exhibit both affinity bias and efficient play. Such preferences stand out in the evolutionary process because they are able to force positive assortative matching and joint payoff maximization. Under incomplete information, a strong form of affinity bias, parochialism, is necessary for a preference to prevail in evolution, because stronger incentives are required to engage in self-sorting with information friction.