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Job Search with Bidder Memories

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Author Info

  • Carlos Carrillo-Tudela

    ()
    (Department of Economics, University of Leicester and IZA)

  • Guido Menzio

    ()
    (Department of Economics, University of Pennsylvania and NBER)

  • Eric Smith

    ()
    (Department of Economics, University of Essex and FRB Atlanta)

Abstract

This paper revisits the no-recall assumption in job search models with take-it-or-leave-it offers. Workers who can recall previously encountered potential employers, in order to engage them in Bertrand bidding, have a distinct advantage over workers without such attachments. Firms account for this difference when hiring a worker. When a worker first meets a firm, the firm offers the worker a sufficient share of the match rents to avoid a bidding war in the future. The pair share the gains to trade. In this case, the Diamond paradox no longer holds.

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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 09-027.

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Length: 25 pages
Date of creation: 01 Jul 2009
Date of revision:
Handle: RePEc:pen:papers:09-027

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Keywords: Job search; recall; wage determination; Diamond paradox;

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References

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  1. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  2. Albrecht, James W & Axell, Bo, 1983. "An Equilibrium Model of Search Unemployment," Working Paper Series 99, Research Institute of Industrial Economics.
  3. Taylor, Curtis R, 1995. "The Long Side of the Market and the Short End of the Stick: Bargaining Power and Price Formation in Buyers', Sellers', and Balanced Markets," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 837-55, August.
  4. Gaumont, Damien & Schindler, Martin & Wright, Randall, 2006. "Alternative theories of wage dispersion," European Economic Review, Elsevier, vol. 50(4), pages 831-848, May.
  5. Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 465-91, October.
  6. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  7. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  8. Guido Menzio & Shouyong Shi, 2008. "Efficient Search on the Job and the Business Cycle," Working Papers tecipa-327, University of Toronto, Department of Economics.
  9. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  10. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
  11. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
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Citations

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Cited by:
  1. Guido Menzio & Nicholas Trachter, 2014. "Large and Small Sellers: A Theory of Equilibrium Price Dispersion with Sequential Search," NBER Working Papers 19990, National Bureau of Economic Research, Inc.
  2. 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).
  3. Ronald Wolthoff, 2013. "It's About Time: Implications of the Period Length in an Equilibrium Search Model," Working Papers tecipa-476, University of Toronto, Department of Economics.

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