Real-Time Search in the Laboratory and the Market
AbstractWhile widely accepted labor market search models imply a constant reservation wage policy, empirical evidence strongly suggests that reservation wages decline in search duration. This paper reports the results of the first real-time-search laboratory experiment. The controlled environment subjects face is stationary, and the payoff-maximizing reservation wage is constant. Nevertheless, subjects' reservation wages decline sharply over time. We investigate two hypotheses to explain this decline: 1. Searchers respond to the stock of accruing search costs. 2. Searchers experience non-stationary subjective costs of time spent searching. Our data support the latter hypothesis, and we substantiate this conclusion both experimentally and econometrically. (JEL C91, D83, J64)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 101 (2011)
Issue (Month): 2 (April)
Other versions of this item:
- Meta Brown & Christopher J. Flinn & Andrew Schotter, 2009. "Real-time search in the laboratory and the market," Staff Reports 410, Federal Reserve Bank of New York.
- Meta Brown & Christopher Flinn & Andrew Schotter, 2009. "Real-Time Search in the Laboratory and the Market," Carlo Alberto Notebooks 135, Collegio Carlo Alberto.
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
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