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Adverse selection and unraveling in common-value labor markets

  • Siegel, Ron


    (Department of Economics, Northwestern University)

  • Ely, Jeffrey C.


    (Department of Economics, Northwestern University)

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    We investigate a common-value labor setting in which firms interview a worker prior to hiring. When firms have private information about the worker’s value and interview decisions are kept private, many firms may enter the market, interview, and hire with positive probability. When firms’ interview decisions are revealed, severe adverse selection arises. As a result, all firms except for the highest-ranked firm are excluded from the hiring process.

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    Article provided by Econometric Society in its journal Theoretical Economics.

    Volume (Year): 8 (2013)
    Issue (Month): 3 (September)

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    Handle: RePEc:the:publsh:964
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    1. Alessandro Citanna & Archishman Chakraborty & Michael Ostrovsky, 2010. "Two-sided matching with interdependent values," Post-Print hal-00463247, HAL.
    2. Chakraborty, Archishman & Citanna, Alessandro & Ostrovsky, Michael, 2010. "Two-sided matching with interdependent values," Journal of Economic Theory, Elsevier, vol. 145(1), pages 85-105, January.
    3. Tayfun Sonmez, 1999. "Strategy-Proofness and Essentially Single-Valued Cores," Econometrica, Econometric Society, vol. 67(3), pages 677-690, May.
    4. Masters, Adrian, 2009. "Matching with interviews," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 938-954, April.
    5. Robin S. Lee & Michael Schwarz, 2009. "Interviewing in Two-Sided Matching Markets," NBER Working Papers 14922, National Bureau of Economic Research, Inc.
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