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Adverse selection and unraveling in common-value labor markets

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  • , C.

    (Department of Economics, Northwestern University)

  • ,

    (Department of Economics, Northwestern University)

Abstract

We investigate a common-value labor setting in which firms interview a worker prior to hiring. When firms have private information about the worker’s value and interview decisions are kept private, many firms may enter the market, interview, and hire with positive probability. When firms’ interview decisions are revealed, severe adverse selection arises. As a result, all firms except for the highest-ranked firm are excluded from the hiring process.

Suggested Citation

  • , C. & ,, 2013. "Adverse selection and unraveling in common-value labor markets," Theoretical Economics, Econometric Society, vol. 8(3), September.
    • Handle: RePEc:the:publsh:964
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    References listed on IDEAS

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    Cited by:

    1. Inácio Bó & Chiu Yu Ko, 2021. "Competitive screening and information transmission," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(3), pages 407-437, June.
    2. Adina D. Sterling, 2014. "Friendships and Search Behavior in Labor Markets," Management Science, INFORMS, vol. 60(9), pages 2341-2354, September.
    3. Archishman Chakraborty & Alessandro Citanna & Michael Ostrovsky, 2015. "Group stability in matching with interdependent values," Review of Economic Design, Springer;Society for Economic Design, vol. 19(1), pages 3-24, March.
    4. Josephson, Jens & Shapiro, Joel, 2016. "Costly interviews," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 10-15.
    5. Benjamin N. Roth & Ran I. Shorrer, 2021. "Making Marketplaces Safe: Dominant Individual Rationality and Applications to Market Design," Management Science, INFORMS, vol. 67(6), pages 3694-3713, June.

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    More about this item

    Keywords

    Adverse selection; unraveling; interviews;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations

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