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Competition in a Posted-Salary Matching Market under Private Information

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  • Boosey Luke A.

Abstract

We study a posted-salary labor market in which firms engage in salary competition. Firms’ preferences over workers are private information, creating uncertainty about competitive pressure for different workers. We consider a baseline 2-firm, 2-worker model, then extend the analysis to larger markets by replicating the baseline. We characterize the unique Bayesian- Nash equilibrium, in which each firm type chooses a distributional strategy with interval support in the salary space. The main result shows that competition is localized, in the sense that firm types with a common most preferred worker choose non-overlapping, adjacent supports. We also provide numerical results to show that the equilibrium strategies in finite replicated markets converge to the corresponding equilibrium strategies in a market with a continuum of firms and workers.

Suggested Citation

  • Boosey Luke A., 2016. "Competition in a Posted-Salary Matching Market under Private Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(2), pages 599-631, June.
    • Handle: RePEc:bpj:bejtec:v:16:y:2016:i:2:p:599-631:n:8
    DOI: 10.1515/bejte-2015-0022
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    References listed on IDEAS

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    1. Julio González-Díaz & Ron Siegel, 2013. "Matching and price competition: beyond symmetric linear costs," International Journal of Game Theory, Springer;Game Theory Society, vol. 42(4), pages 835-844, November.
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