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Wage Posting Without Full Commitment

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Author Info

  • 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.

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File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2008-01.pdf
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Bibliographic Info

Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2008-01.

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Length: 30 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:adl:wpaper:2008-01

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References

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  1. Adrian Masters, 2005. "Directed Search without Wage Commitment and the Role of Labor Market Institutions," Discussion Papers 05-02, University at Albany, SUNY, Department of Economics.
  2. Albrecht, James & Gautier, Pieter & Vroman, Susan, 2003. "Equilibrium Directed Search with Multiple Applications," IZA Discussion Papers 719, Institute for the Study of Labor (IZA).
  3. Manolis Galenianos & Philipp Kircher, 2005. "Directed Search with Multiple Job Applications," PIER Working Paper Archive 05-022, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  4. Jan Eeckhout & Philipp Kircher, 2010. "Sorting versus screening: search frictions and competing mechanisms," LSE Research Online Documents on Economics 29704, London School of Economics and Political Science, LSE Library.
  5. Michael Peters & Sergei Severinov, 1995. "Competition Among Sellers who offer Auctions Instead of Prices," Working Papers peters-95-02, University of Toronto, Department of Economics.
  6. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  7. Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-54, September.
  8. Manolis Galenianos & Philipp Kircher, 2012. "On The Gameā€Theoretic Foundations Of Competitive Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 1-21, 02.
  9. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  10. Guido Menzio, 2007. "A Theory of Partially Directed Search," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 748-769, October.
  11. Coles, Melvyn G. & Eeckhout, Jan, 2003. "Indeterminacy and directed search," Journal of Economic Theory, Elsevier, vol. 111(2), pages 265-276, August.
  12. Peters, Michael, 2000. "Limits of Exact Equilibria for Capacity Constrained Sellers with Costly Search," Journal of Economic Theory, Elsevier, vol. 95(2), pages 139-168, December.
  13. Matthew Doyle & Jacob Wong, 2008. "Wage Posting Without Full Commitment," Working Papers 08004, University of Waterloo, Department of Economics.
  14. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  15. Julien, B. & Kennes, J. & King, I., 1998. "Bidding for Labour," Discussion Papers dp98-03, Department of Economics, Simon Fraser University.
  16. Camera, Gabriele & Selcuk, Cemil, 2004. "Price Dispersion with Directed Search," Purdue University Economics Working Papers 1173, Purdue University, Department of Economics.
  17. Kultti, K.K., 1997. "Equivalence of Auctions and Posted Prices," Discussion Paper 1997-57, Tilburg University, Center for Economic Research.
  18. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
  19. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  20. Philipp Kircher & Jan Eeckhout, 2008. "Prices as Optimal Competitive Sales Mechanisms," 2008 Meeting Papers 504, Society for Economic Dynamics.
  21. Claudio Michelacci & Javier Suarez, 2006. "Incomplete Wage Posting," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1098-1123, December.
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Cited by:
  1. Matthew Doyle & Jacob Wong, 2008. "Wage Posting Without Full Commitment," School of Economics Working Papers 2008-01, University of Adelaide, School of Economics.

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