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Simultaneous Search and Network Efficiency

Author

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  • Pieter A. Gautier

    (VU University Amsterdam, CEPR, IZA)

  • Christian L. Holzner

    (University of Munich, Ifo Institute for Economic Research, CESifo)

Abstract

When workers send applications to vacancies they create a network. Frictionsarise because workers typically do not know where other workers apply to and firmsdo not know which candidates other firms consider. The first coordination frictionaffects network formation, while the second coordination friction affects networkclearing. We show that those frictions and the wage mechanism are in general notindependent. The wage mechanism determines both the distribution of networksthat can arise and the number of matches on a given network. Equilibria that exhibitwage dispersion are inefficient in terms of network formation. Under complete recall(firms can go back and forth between all their candidates) only wage mechanismsthat allow for ex post Bertrand competition generate the maximum matching on arealized network.

Suggested Citation

  • Pieter A. Gautier & Christian L. Holzner, 2011. "Simultaneous Search and Network Efficiency," Tinbergen Institute Discussion Papers 11-092/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20110092
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    References listed on IDEAS

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    Cited by:

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    2. Cheremukhin, Anton & Restrepo-Echavarria, Paulina & Tutino, Antonella, 2020. "Targeted search in matching markets," Journal of Economic Theory, Elsevier, vol. 185(C).
    3. Matthew O. Jackson & Brian W. Rogers & Yves Zenou, 2017. "The Economic Consequences of Social-Network Structure," Journal of Economic Literature, American Economic Association, vol. 55(1), pages 49-95, March.
    4. Kyungmin Kim & Philipp Kircher, 2013. "Efficient Competition through Cheap Talk: Competing Auctions and Competitive Search without Ex Ante Price Commitment," Edinburgh School of Economics Discussion Paper Series 235, Edinburgh School of Economics, University of Edinburgh.
    5. Paulina Restrepo-Echavarria & Antonella Tutino & Anton Cheremukhin, 2013. "A Theory of Targeted Search," 2013 Meeting Papers 664, Society for Economic Dynamics.

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    More about this item

    Keywords

    Efficiency; network clearing; random bipartite network formation; simultaneous;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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