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Competing for Talent

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Abstract

In many labor markets, e.g., for lawyers, consultants, MBA students, and professional sport players, workers get offered and sign long-term contracts even though waiting could reveal significant information about their capabilities. This phenomenon is called unraveling. We examine the link between wage bargaining and unraveling. Two firms, an incumbent and an entrant, compete to hire a worker of unknown talent. Informational frictions prevent the incumbent from always observing the entrant's arrival, inducing unraveling in all equilibria. We analyze the extent of unraveling, surplus shares, the average talent of employed workers, and the distribution of wages within and across firms.

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  • Yuhta Ishii & Aniko Ory & Adrien Vigier, 2018. "Competing for Talent," Cowles Foundation Discussion Papers 2119, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2119
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    Cited by:

    1. Ambuehl, Sandro & Groves, Vivienne, 2020. "Unraveling over time," Games and Economic Behavior, Elsevier, vol. 121(C), pages 252-264.
    2. Z. Eddie Ning, 2021. "List Price and Discount in a Stochastic Selling Process," Marketing Science, INFORMS, vol. 40(2), pages 366-387, March.

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    More about this item

    Keywords

    Unraveling; Talent; Wage Bargaining; Competition; Uncertainty;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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