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Wage Posting Without Full Commitment

Author

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  • Matthew Doyle

    (Department of Economics, The University of Waterloo)

  • Jacob Wong

    (School of Economics, University of Adelaide)

Abstract

Wage posting models of job search typically assume that firms can commit to paying workers the posted wage. This paper investigates the consequences of relaxing this assumption. Under ``downward'' commitment, firms can commit only to paying at least their advertised wage. We show that wage posting is always an equilibrium, although in special cases other equilibria can exist. Surprisingly, the wage posting equilibrium in our economy is identical to the equilibrium when firms can commit to paying exactly their posted wage. When firms cannot even commit to paying at least their advertised wage, equilibrium exhibits job auctions with wage dispersion which generally is not constrained efficient.

Suggested Citation

  • Matthew Doyle & Jacob Wong, 2008. "Wage Posting Without Full Commitment," School of Economics and Public Policy Working Papers 2008-01, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2008-01
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    File URL: https://media.adelaide.edu.au/economics/papers/doc/wp2008-01.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Tan, Serene, 2022. "Income inequality and endogenous market structure under directed search," Journal of Economic Theory, Elsevier, vol. 201(C).
    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. 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.
    4. 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.
    5. Randall Wright & Philipp Kircher & Benoit Julîen & Veronica Guerrieri, 2017. "Directed Search: A Guided Tour," NBER Working Papers 23884, National Bureau of Economic Research, Inc.
    6. 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.
    7. 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.

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    More about this item

    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
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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