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Simultaneous Search with Heterogeneous Firms and Ex Post Competition

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  • Pieter A. Gautier

    ()
    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

  • Ronald P. Wolthoff

    ()
    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

Abstract

In this paper we study the allocation of workers over high and low productivity firms in a labor market with coordination frictions. Specifically, we consider a search model where workers can apply to high and or low productivity firms. Firms that compete for the same candidate can increase their wage offers as often as they like. We show that if workers apply to two jobs, there is a unique symmetric equilibrium where workers mix between sending both applications to the high and sending both to the low productivity sector. But, efficiency requires that they apply to both sectors because a higher matching rate in the high-productivity sector can then be realized with fewer applications (and consequently fewer coordination frictions) if workers always accept the offer of the most productive firm. However, in the market the worker's payoff is determined by how much the firm with the second highest productivity is willing to bid. This is what prevents them from applying to both sectors. For many configurations, the equilibrium outcomes are the same under directed and random search so our results are not driven by random search. We discuss the effects of increasing the number of applications and show that our results can easily be generalized to N -firms. See publication in Labour Economics , 2009, 16(3), 311-19.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-032/3.

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Date of creation: 27 Mar 2006
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Handle: RePEc:dgr:uvatin:20060032

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Web page: http://www.tinbergen.nl

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Keywords: Directed search; multiple applications; efficiency;

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  1. Pieter A. Gautier & Jose L. Moraga, 2004. "Strategic Wage Setting and Coordination Frictions with Multiple Applications," Tinbergen Institute Discussion Papers 04-063/1, Tinbergen Institute, revised 16 Aug 2004.
  2. Julien, B. & Kennes, J. & King, I., 1998. "Bidding for Labour," Discussion Papers dp98-03, Department of Economics, Simon Fraser University.
  3. Kultti, K.K., 1997. "Equivalence of Auctions and Posted Prices," Discussion Paper, Tilburg University, Center for Economic Research 1997-57, Tilburg University, Center for Economic Research.
  4. James Albrecht, Pieter Gautier, & Susan Vroman, 2003. "Equilibrium Directed Search with Multiple Application," Working Papers, Georgetown University, Department of Economics gueconwpa~03-03-02, Georgetown University, Department of Economics.
  5. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, Econometric Society, vol. 70(6), pages 2295-2350, November.
  6. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum, Oslo University, Department of Economics 37/1995, Oslo University, Department of Economics.
  7. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  8. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 113(5), pages 996-1025, October.
  9. Hector Chade & Lones Smith, . "Simultaneous Search," Working Papers, Department of Economics, W. P. Carey School of Business, Arizona State University 2168591, Department of Economics, W. P. Carey School of Business, Arizona State University.
  10. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  11. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, Econometric Society, vol. 51(4), pages 955-69, July.
  12. 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.
  13. Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, Econometric Society, vol. 59(5), pages 1425-54, September.
  14. Steven J. Davis, 2001. "The Quality Distribution of Jobs and the Structure of Wages in Search Equilibrium," NBER Working Papers 8434, National Bureau of Economic Research, Inc.
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Cited by:
  1. Gautier, Pieter A. & Holzner, Christian, 2013. "Simultaneous search and network efficiency," Munich Reprints in Economics, University of Munich, Department of Economics 20321, University of Munich, Department of Economics.
  2. Gautier, Pieter A & Moraga-González, José-Luis & Wolthoff, Ronald, 2007. "Structural Estimation of Search Intensity: Do Non-Employed Workers Search Enough?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6440, C.E.P.R. Discussion Papers.
  3. Pieter Gautier & Jose Luis Moraga-Gonzalez & Ronald Wolthoff, 2007. "Structural Estimation of Search Intensity: Do non-employed workers search hard enough?," 2007 Meeting Papers, Society for Economic Dynamics 695, Society for Economic Dynamics.
  4. Kaas, Leo, 2008. "Variable Search Intensity in an Economy with Coordination Unemployment," IZA Discussion Papers 3697, Institute for the Study of Labor (IZA).
  5. Wolthoff, Ronald P., 2011. "It's About Time: Implications of the Period Length in an Equilibrium Job Search Model," IZA Discussion Papers 6002, Institute for the Study of Labor (IZA).
  6. Gavrel, Frédéric & Lebon, Isabelle & Rebiere, Therese, 2014. "Formal Education Versus Learning-by-Doing," IZA Discussion Papers 8341, Institute for the Study of Labor (IZA).

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