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Multiple applications, competing mechanisms, and market power

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  • Albrecht, James
  • Cai, Xiaoming
  • Gautier, Pieter
  • Vroman, Susan

Abstract

We consider a labor market with search frictions in which workers make multiple applications and firms can post and commit to general mechanisms that may be conditioned both on the number of applications received and on the number of offers received by the firm's candidate. When the contract space includes application fees, there exists a continuum of symmetric equilibria of which only one is efficient, and it has a posted wage equal to match output. In the inefficient equilibria, the wage is below match output, and the value of a worker's application depends on whether he or she receives another offer. This allows individual firms to free ride on one another and gives firms market power. When we endogenize the number of applications and allow for general mechanisms, only the efficient equilibrium survives. By allowing for general mechanisms, we are able to examine the sources of inefficiency in the multiple applications literature.

Suggested Citation

  • Albrecht, James & Cai, Xiaoming & Gautier, Pieter & Vroman, Susan, 2020. "Multiple applications, competing mechanisms, and market power," Journal of Economic Theory, Elsevier, vol. 190(C).
  • Handle: RePEc:eee:jetheo:v:190:y:2020:i:c:s0022053120301149
    DOI: 10.1016/j.jet.2020.105121
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    Cited by:

    1. Xiaoming Cai & Pieter Gautier & Ronald Wolthoff, 2021. "Search, Screening and Sorting," Working Papers tecipa-699, University of Toronto, Department of Economics.
    2. Albrecht, James & Cai, Xiaoming & Gautier, Pieter A. & Vroman, Susan, 2021. "On the Foundations of Competitive Search Equilibrium with and without Market Makers," IZA Discussion Papers 14524, Institute of Labor Economics (IZA).
    3. He, Chuan & Mau, Karsten & Xu, Mingzhi, 2021. "Trade Shocks and Firms Hiring Decisions: Evidence from Vacancy Postings of Chinese Firms in the Trade War," Labour Economics, Elsevier, vol. 71(C).
    4. Sarah Auster & Piero Gottardi & Ronald Wolthoff, 2022. "Simultaneous Search and Adverse Selection," Working Papers tecipa-734, University of Toronto, Department of Economics.
    5. Kęstutis Peleckis, 2022. "Application of the Multicriteria Method Seeking to Assess Concentration, and Its Effects on Competition in the Manufacturing Sector," Sustainability, MDPI, vol. 14(19), pages 1-30, September.
    6. Kęstutis Peleckis, 2022. "Application of the Fuzzy VIKOR Method to Assess Concentration and Its Effects on Competition in the Energy Sector," Energies, MDPI, vol. 15(4), pages 1-16, February.
    7. Lee, Joonbae, 2022. "Role of common preferences in the outcome of many-to-many matching," Economics Letters, Elsevier, vol. 217(C).

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    More about this item

    Keywords

    Multiple applications; Directed search; Competing mechanisms; Efficiency; Market power;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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