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Real-Time Search in the Laboratory and the Market

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  • Meta Brown
  • Christopher Flinn
  • Andrew Schotter

Abstract

While widely accepted models of labor market search imply a constant reservation wage policy, the empirical evidence strongly suggests that reservation wages decline over the duration of a search spell. This paper reports the results of the first real-time search laboratory experiment. The controlled environment that subjects face is stationary, and the payoff-maximizing reservation wage is constant. Nevertheless, subjects' reservation wags decline sharply over time. We investigate two hypotheses to explain this decline: 1) searchers respond to the stock of accruing search costs, and 2) searchers experience nonstationary subjective costs of time spent searching. Our data support the latter hypothesis, and we substantiate this conclusion both experimentally and econometrically.

Suggested Citation

  • Meta Brown & Christopher Flinn & Andrew Schotter, 2009. "Real-Time Search in the Laboratory and the Market," Carlo Alberto Notebooks 135, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:135
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    References listed on IDEAS

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    1. Addison, John T & Portugal, Pedro, 1987. "On the Distributional Shape of Unemployment Duration," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 521-526, August.
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    More about this item

    Keywords

    Job Search; Reservation Wage; Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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