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Wage Posting Without Full Commitment

Author

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  • Matthew Doyle

    (University of Waterloo)

  • Jacob Wong

    (University of Adelaide)

Abstract

Wage posting models of job search typically assume that firms can commit to paying workers exactly the posted wage. We relax this assumption and impose "downward" commitment; firms can commit only to paying at least their advertised wage. As each firm can only commit to pay at least their advertised wage, workers may demand that the firm pay more than the advertised wage. In labour markets with a finite number of workers and firms, the strategic interaction between firms makes it costly for firms to provide applicants the incentive not to demand wages in excess of the advertised wage. In equilibrium, firms may settle for running job auctions at the cost of losing control of the number of applicants that they can attract. When this strategic interaction between firms vanishes, workers never choose to demand more than the advertised wage. (Copyright: Elsevier)

Suggested Citation

  • Matthew Doyle & Jacob Wong, 2013. "Wage Posting Without Full Commitment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 231-252, April.
    • Handle: RePEc:red:issued:11-20
    DOI: 10.1010/j.red.2012.12.002
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    References listed on IDEAS

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    Cited by:

    1. Gomis-Porqueras Pedro & Julien Benoît & Wang Liang, 2018. "Competitive Search with Ex-post Opportunism," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 18(1), pages 1-17, January.
    2. Matthew Doyle & Jacob Wong, 2013. "Wage Posting Without Full Commitment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 231-252, April.
    3. Nicolas L. Jacquet & John Kennes & Serene Tan, 2019. "Wagevacancy contracts and multiplicity of equilibria in a directed search model of the labour market," Canadian Journal of Economics, Canadian Economics Association, vol. 52(2), pages 784-821, May.
    4. Derek Stacey, 2019. "Posted Prices, Search and Bargaining," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 33, pages 85-104, July.
    5. Ian King & Frank Stähler, 2018. "Capital Utilization and Search Unemployment in Dynamic General Equilibrium," Discussion Papers Series 598, School of Economics, University of Queensland, Australia.
    6. Tan, Serene, 2022. "Income inequality and endogenous market structure under directed search," Journal of Economic Theory, Elsevier, vol. 201(C).
    7. Kircher, Philipp & Wright, Randall & Julien, Benoit & Guerrieri, Veronica, 2017. "Directed Search: A Guided Tour," CEPR Discussion Papers 12315, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Directed search; commitment; wage posting;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms

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