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Job Market Signalling of Relative Position, or Becker Married to Spence

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Author Info
Ed Hopkins ()

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Abstract

We consider a matching model of the labour market where workers that differ in quality send signals to firms that are also vertically differentiated. Signals allow assortative matching in which the highest quality workers send the highest signals and are hired by the best firms. Matching is consider both when wages are fixed (non-transferable utility) and when they are fully flexible (utility is transferable). In both cases payoffs are determined by relative position - the best worker gets the best job. The standard signalling model which communicates the signaller’s absolute type is a special case of the current model of signalling relative position. Furthermore, in the relative model, equilibrium strategies and payoffs depend on the distributions of types of workers and the distribution of firms. This is in contrast with separating equilibria of the standard model which do not respond to changes in supply or demand. Despite incomplete information, equilibrium investment in education by low ability workers can be inefficiently low.

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Publisher Info
Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 134.

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Length: 32
Date of creation: Jun 2005
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Handle: RePEc:edn:esedps:134

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Related research
Keywords: Signalling; relative position; matching; tournaments.;

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
  3. Heidrun C. Hoppe & Benny Moldovanu & Aner Sela, 2005. "The Theory of Assortative Matching Based on Costly Signals," Discussion Papers 85, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  4. Harold L. Cole & George J. Mailath & Andrew Postlewaite, . "Efficient Non-Contractible Investments," Penn CARESS Working Papers 08d6793d32cab8f6e1f46dac0, Penn Economics Department. [Downloadable!]
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  15. Spence, Michael, 1974. "Competitive and optimal responses to signals: An analysis of efficiency and distribution," Journal of Economic Theory, Elsevier, vol. 7(3), pages 296-332, March. [Downloadable!] (restricted)
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  20. Fernandez, Raquel & Gali, Jordi, 1999. "To Each According to . . . ? Markets, Tournaments, and the Matching Problem with Borrowing Constraints," Review of Economic Studies, Blackwell Publishing, vol. 66(4), pages 799-824, October. [Downloadable!] (restricted)
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  21. Alvin E. Roth, 2002. "The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics," Econometrica, Econometric Society, vol. 70(4), pages 1341-1378, July. [Downloadable!] (restricted)
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  24. Peters, Michael, 2004. "The Pre-Marital Investment Game," Micro Theory Working Papers peters-04-02-18-01-42-09, Microeconomics.ca Website, revised 13 Sep 2006. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Peters, Michael, 2006. "Truncated Hedonic Equilibrium," Micro Theory Working Papers peters-06-04-11-02-42-39, Microeconomics.ca Website, revised 03 Mar 2009. [Downloadable!]
  2. Heidrun C. Hoppe & Benny Moldovanu & Aner Sela, 2005. "The Theory of Assortative Matching Based on Costly Signals," Discussion Papers 85, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
    Other versions:
  3. Ed Hopkins & Tatiana Kornienko, 2008. "Which Inequality? The Inequality of Endowments Versus the Inequality of Rewards," ESE Discussion Papers 185, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
  4. Ed Hopkins & Tatiana Kornienko, 2006. "Which Inequality? The Inequality of Resources Versus the Inequality of Rewards," Levine's Bibliography 784828000000000621, UCLA Department of Economics. [Downloadable!]
  5. Michael Ostrovsky & Michael Schwarz, 2008. "Information Disclosure and Unraveling in Matching Markets," NBER Working Papers 13766, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Pérez Truglia, Ricardo Nicolás, 2007. "Can a rise in income inequality improve welfare?," MPRA Paper 4700, University Library of Munich, Germany, revised 22 Dec 2007. [Downloadable!]
  7. Friedrich Poeschel, 2008. "Assortative matching through signals," PSE Working Papers 2008-71, PSE (Ecole normale supérieure). [Downloadable!]
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