Real-time search in the laboratory and the market
AbstractWhile widely accepted models of labor market search imply a constant reservation wage policy, the empirical evidence strongly suggests that reservation wages decline in the duration of search. 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 wages 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.
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Bibliographic InfoPaper provided by Federal Reserve Bank of New York in its series Staff Reports with number 410.
Date of creation: 2009
Date of revision:
Other versions of this item:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-16 (All new papers)
- NEP-CBE-2010-01-16 (Cognitive & Behavioural Economics)
- NEP-DGE-2010-01-16 (Dynamic General Equilibrium)
- NEP-EXP-2010-01-16 (Experimental Economics)
- NEP-LAB-2010-01-16 (Labour Economics)
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