The existence of counteroffers can lead to a variety of important labor-market features. This article develops a model of the selective use of counteroffers in which a firm decides whether to extend counteroffers after a worker informs the firm of an alternative offer. We outline factors that can influence the employer's net value of making a counteroffer and, thus, affect the likelihood of a counteroffer. We provide a new empirical analysis that examines whether proxies for these factors do, in fact, influence the likelihood that a firm would consider a counteroffer to an employee with a competing offer.
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