Conformity in search markets
AbstractWe study how private information is used in a search market with non-transferable utility. We show that competitive pressure can turn privately informed agents into "yes men" who, against their own better judgement, mimic behavior that prior information suggests is more valuable. This is more likely to happen when prior, public information is strong relative to private information. The result is not enough frictional unemployment and search, and too much employment in activities favored by prior information. Moreover, the "yes-man" incentive grows stronger when private information is more persistent: we are more likely to lie about what we are than about what we know.
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Bibliographic InfoPaper provided by Hunter College Department of Economics in its series Economics Working Paper Archive at Hunter College with number 422.
Date of creation: 2008
Date of revision:
Search; Non-Transferable Utility; Conformity; Yes Men;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- 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-2008-07-14 (All new papers)
- NEP-CTA-2008-07-14 (Contract Theory & Applications)
- NEP-LAB-2008-07-14 (Labour Economics)
- NEP-UPT-2008-07-14 (Utility Models & Prospect Theory)
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