Advanced Search
MyIDEAS: Login

Information, bilateral negotiations, and worker recruitment

Contents:

Author Info

  • Schram, Arthur
  • Brandts, Jordi
  • Gërxhani, Klarita

Abstract

This paper studies experimentally how firms choose between using a centralized market and bilateral negotiations to recruit new personnel. In the market firms interact with several workers but do not have information about workers' behavior in the past. In the bilateral negotiations firms negotiate bilaterally with prospective workers and learn about workers' performance in previous jobs. We show that the interaction between social preferences, the incompleteness of contracts and the existence of information about a worker's past performance provides an explanation for firms forgoing market opportunities and bilaterally negotiating with a worker. We observe that approximately 30% of all job contracts were bilaterally negotiated when these contracts are incomplete as opposed to only 10% when contracts were complete. The surplus from trade is higher when incomplete contracts can be bilaterally negotiated, which can be attributed to the presence of information.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V64-4YRHCX8-1/2/94e8561202b0348d6f9edf68254626f6
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 54 (2010)
Issue (Month): 8 (November)
Pages: 1035-1058

as in new window
Handle: RePEc:eee:eecrev:v:54:y:2010:i:8:p:1035-1058

Contact details of provider:
Web page: http://www.elsevier.com/locate/eer

Related research

Keywords: Worker recruitment Labor markets Bilateral negotiations Indirect reciprocity Experiments;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Fehr, Ernst & Kirchsteiger, Georg & Riedl, Arno, 1998. "Gift exchange and reciprocity in competitive experimental markets," European Economic Review, Elsevier, vol. 42(1), pages 1-34, January.
  2. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences With Simple Tests," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 817-869, August.
  3. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
  4. Samuel Bentolila & Claudio Michelacci & Javier Suarez, 2004. "Social Contacts And Occupational Choice," Working Papers wp2004_06, CEMFI.
  5. Chan, William, 1996. "External Recruitment versus Internal Promotion," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 555-70, October.
  6. M.A. Nowak & K. Sigmund, 1998. "Evolution of Indirect Reciprocity by Image Scoring/ The Dynamics of Indirect Reciprocity," Working Papers ir98040, International Institute for Applied Systems Analysis.
  7. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
  8. Kirchsteiger,Georg & Alós-Ferrer,Carlos, 2003. "Does Learning Lead to Coordination on Market Clearing Institutions?," Research Memorandum 053, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  9. Kirchsteiger, Georg & Niederle, Muriel & Potters, Jan, 2005. "Endogenizing market institutions: An experimental approach," European Economic Review, Elsevier, vol. 49(7), pages 1827-1853, October.
  10. Falk, Armin & Fehr, Ernst, 2003. "Why labour market experiments?," Labour Economics, Elsevier, vol. 10(4), pages 399-406, August.
  11. Georg Kirchsteiger & Ernst Fehr & Arno Riedl, 1993. "Does Fairness Prevent Market Clearing? An Experimental Investigation," ULB Institutional Repository 2013/5927, ULB -- Universite Libre de Bruxelles.
  12. Gary E. Bolton & Elena Katok & Axel Ockenfels, 2004. "How Effective Are Electronic Reputation Mechanisms? An Experimental Investigation," Management Science, INFORMS, vol. 50(11), pages 1587-1602, November.
  13. Brown, Martin & Falk, Armin & Fehr, Ernst, 2008. "Competition and Relational Contracts: The Role of Unemployment as a Disciplinary Device," IZA Discussion Papers 3345, Institute for the Study of Labor (IZA).
  14. Cox, J. & Friedman, D. & Gjerstad, S., 2006. "A Trackable Model of Reciprocity and Fairness," Purdue University Economics Working Papers 1181, Purdue University, Department of Economics.
  15. Lindeboom, Maarten & van Ours, Jan C & Renes, Gusta, 1994. "Matching Employers and Workers: An Empirical Analysis on the Effectiveness of Search," Oxford Economic Papers, Oxford University Press, vol. 46(1), pages 45-67, January.
  16. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
  17. Neugebauer, Tibor & Poulsen, Anders & Schramm, Arthur, 2002. "Fairness and Reciprocity in the Hawk-Dove game," Working Papers 02-12, University of Aarhus, Aarhus School of Business, Department of Economics.
  18. Cees Gorter & Jos Van Ommeren, 1999. "Sequencing, timing and filling rates of recruitment channels," Applied Economics, Taylor & Francis Journals, vol. 31(10), pages 1149-1160.
  19. Michael Kosfeld & Armin Falk, 2006. "The Hidden Costs of Control," American Economic Review, American Economic Association, vol. 96(5), pages 1611-1630, December.
  20. Calvo-Armengol, Antoni, 2004. "Job contact networks," Journal of Economic Theory, Elsevier, vol. 115(1), pages 191-206, March.
  21. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  22. Milgrom, Paul R, 1988. "Employment Contracts, Influence Activities, and Efficient Organization Design," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 42-60, February.
  23. Alvin E. Roth & V. Prasnikar & M. Okuno-Fujiwara & S. Zamir, 1998. "Bargaining and market behavior in Jerusalem, Liubljana, Pittsburgh and Tokyo: an experimental study," Levine's Working Paper Archive 344, David K. Levine.
  24. Davis, Douglas D. & Harrison, Glenn W. & Williams, Arlington W., 1993. "Convergence to nonstationary competitive equilibria : An experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 22(3), pages 305-326, December.
  25. Seinen, Ingrid & Schram, Arthur, 2006. "Social status and group norms: Indirect reciprocity in a repeated helping experiment," European Economic Review, Elsevier, vol. 50(3), pages 581-602, April.
  26. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
  27. Ours, J.C. van & Ridder, G., 1992. "Vacancies and recruitment of new employees," Open Access publications from Tilburg University urn:nbn:nl:ui:12-142178, Tilburg University.
  28. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 1997. "Reciprocity as a Contract Enforcement Device: Experimental Evidence," Econometrica, Econometric Society, vol. 65(4), pages 833-860, July.
  29. Ours, J.C. van & Ridder, G., 1991. "Cyclical Variation in Vacancy Durations and Vacancy Flows: An Empirical Analysis," Open Access publications from Tilburg University urn:nbn:nl:ui:12-142203, Tilburg University.
  30. Bontemps, Christian & Robin, Jean-Marc & van den Berg, Gerard J, 2000. "Equilibrium Search with Continuous Productivity Dispersion: Theory and Nonparametric Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 305-58, May.
  31. van Ours, Jan & Ridder, Geert, 1991. "Cyclical variation in vacancy durations and vacancy flows : An empirical analysis," European Economic Review, Elsevier, vol. 35(5), pages 1143-1155, July.
  32. Jordi Brandts & Gary Charness, 2004. "Do Labour Market Conditions Affect Gift Exchange? Some Experimental Evidence," Economic Journal, Royal Economic Society, vol. 114(497), pages 684-708, 07.
  33. Albrecht, James W & Axell, Bo, 1984. "An Equilibrium Model of Search Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 824-40, October.
  34. Burdett, Kenneth & Mortensen, Dale T, 1980. "Search, Layoffs, and Labor Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 88(4), pages 652-72, August.
  35. Ernst Fehr & Armin Falk, 1999. "Wage Rigidity in a Competitive Incomplete Contract Market," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 106-134, February.
  36. Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers.
  37. Eguchi, Kyota, 2005. "Job transfer and influence activities," Journal of Economic Behavior & Organization, Elsevier, vol. 56(2), pages 187-197, February.
  38. Mortensen, Dale T, 1970. "Job Search, the Duration of Unemployment, and the Phillips Curve," American Economic Review, American Economic Association, vol. 60(5), pages 847-62, December.
  39. Brown, Martin & Falk, Armin & Fehr, Ernst, 2003. "Relational Contracts and the Nature of Market Interactions," IZA Discussion Papers 897, Institute for the Study of Labor (IZA).
  40. van Ours, Jan & Ridder, Geert, 1992. "Vacancies and the Recruitment of New Employees," Journal of Labor Economics, University of Chicago Press, vol. 10(2), pages 138-55, April.
  41. Baker, George P, 1992. "Incentive Contracts and Performance Measurement," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 598-614, June.
  42. Martin Brown & Christian Zehnder, 2005. "Credit Registries, Relationship Banking and Loan Repayment," IEW - Working Papers 240, Institute for Empirical Research in Economics - University of Zurich.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Nicola Meccheri & Luciano Fanti, 2012. "Informal incentive labour contracts and product market competition," Discussion Papers 2012/139, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:54:y:2010:i:8:p:1035-1058. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.