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Ex post bidding and efficient coordination unemployment

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  • Benoît Julien
  • John Kennes
  • Ian King

Abstract

. We study the implementation of constrained‐efficient allocations in labour markets where a basic coordination problem leads to an equilibrium matching friction. We argue that these allocations can be achieved in a non‐cooperative equilibrium if wages are determined by ex post bidding. This holds true even in finite‐sized markets where the equilibrium‐matching process has decreasing returns to scale – where the ‘Hosios rule’ does not apply – both with and without heterogeneity. JEL classification: D83, J64 Enchère ex post et chômage efficient de coordination. Les auteurs étudient la mise en œuvre d’allocations axées sur l’efficacité dans des marchés du travail où un problème fondamental de coordination engendre un équilibre frictionnel. On suggère qu’on peut atteindre ces allocations dans un équilibre sans coopération si les niveaux de salaires sont déterminés par des enchères ex post. Cela demeure vrai même dans des marchés de taille finie où le processus d’équilibration fait l’expérience de rendements décroissants à l’échelle – là où la règle d’Hosios ne s’applique pas –à la fois quand il y a et qu’il n’y a pas d’hétérogéneité.

Suggested Citation

  • Benoît Julien & John Kennes & Ian King, 2005. "Ex post bidding and efficient coordination unemployment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(1), pages 174-193, February.
  • Handle: RePEc:wly:canjec:v:38:y:2005:i:1:p:174-193
    DOI: 10.1111/j.0008-4085.2005.00274.x
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
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    4. Benoît Julien & John Kennes & Ian King, 2002. "Auctions Beat Posted Prices in a Small Market," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 158(4), pages 548-562, December.
    5. Peters, Michael, 1984. "Bertrand Equilibrium with Capacity Constraints and Restricted Mobility," Econometrica, Econometric Society, vol. 52(5), pages 1117-1127, September.
    6. James Albrecht & Pieter A. Gautier & Susan Vroman, 2006. "Equilibrium Directed Search with Multiple Applications," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 869-891.
    7. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    8. Halko, Marja-Liisa & Kultti, Klaus & Niinimaki, Juha-Pekka, 2007. "Evolutionary stability of trading rules in an urn-ball matching model," Research in Economics, Elsevier, vol. 61(1), pages 11-15, March.
    9. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-979, December.
    10. Lu, Xiaohua & McAfee, R. Preston, 1996. "The Evolutionary Stability of Auctions over Bargaining," Games and Economic Behavior, Elsevier, vol. 15(2), pages 228-254, August.
    11. James D. Montgomery, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 163-179.
    12. Shi, Shouyong, 2001. "Frictional Assignment. I. Efficiency," Journal of Economic Theory, Elsevier, vol. 98(2), pages 232-260, June.
    13. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 996-1025, October.
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    Citations

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    Cited by:

    1. Manolis Galenianos & Philipp Kircher, 2012. "On The Game‐Theoretic Foundations Of Competitive Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 1-21, February.
    2. Gabor Virag, 2008. "Buyer heterogeneity and competing mechanism," 2008 Meeting Papers 702, Society for Economic Dynamics.
    3. Basov, Suren & King, Ian & Uren, Lawrence, 2014. "Worker heterogeneity, the job-finding rate, and technical change," European Economic Review, Elsevier, vol. 70(C), pages 159-177.
    4. Ian King & Frank Stähler, 2014. "International trade and directed search unemployment in general equilibrium," Canadian Journal of Economics, Canadian Economics Association, vol. 47(2), pages 580-604, May.
    5. Suren Basov & John Ian King & Lawrence Uren, 2010. "The Employed, the Unemployed, and the Unemployable: Directed Search with Worker Heterogeneity," Working Papers 2010.03, School of Economics, La Trobe University.
    6. Bruno Decreuse & André Zylberberg, 2007. "Job search with ubiquity and the wage distribution," Working Papers halshs-00255780, HAL.
    7. John Kennes, 2004. "Competitive Auctions: Theory and Application," Discussion Papers 04-16, University of Copenhagen. Department of Economics.
    8. Benoît Julien & John Kennes & Ian King & Sephorah Mangin, 2009. "Directed search, unemployment and public policy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(3), pages 956-983, August.
    9. Decreuse, Bruno & Zylberberg, André, 2006. "Job search with ubiquity and the wage distribution," MPRA Paper 3630, University Library of Munich, Germany, revised Apr 2007.
    10. Julien, Benoit & Kennes, John & King, Ian Paul, 2011. "Implementing the Mortensen rule in a frictional labor market," Journal of Macroeconomics, Elsevier, vol. 33(1), pages 80-91, March.

    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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