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Efficiency of Simultaneous Search

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  • Philipp Kircher

    () (Department of Economics, University of Pennsylvania)

Abstract

We analyze a labor search model in which workers choose their search intensity by deciding how often and where to apply for jobs. They observe firms’ wage postings prior to their decision. Due to coordination frictions a firm may not receive any applications; otherwise it is able to hire unless all its applicants have better offers. We show that in equilibrium the entry of firms, the search intensity and the number of filled vacancies are constrained efficient. Wage dispersion creates an (endogenous) safety net against unemployment that is essential for efficiency. As application costs vanish the equilibrium becomes unconstrained efficient.

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Bibliographic Info

Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 08-004.

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Length: 46 pages
Date of creation: 03 Jan 2008
Date of revision:
Handle: RePEc:pen:papers:08-004

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Keywords: simultaneous search; directed search; efficient wage dispersion; modified Hosios condition; search with stable matchings;

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References

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  2. Lauermann, Stephan, 2011. "Dynamic matching and bargaining games: A general approach," MPRA Paper 31717, University Library of Munich, Germany.
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  4. Michael Peters, 1998. "Limits of Exact Equilibria for Capacity Constrained Sellers with costlySearch," Working Papers peters-98-01, University of Toronto, Department of Economics.
  5. 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.
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