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Wage offers and on‐the‐job search

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  • Tristan Potter
  • Dan Bernhardt

Abstract

We study the wage‐setting problem of an employer with private information about demand for its product when workers can engage in costly on‐the‐job search. Employers understand that low wage offers may convey bad news that induces workers to search. The unique perfect sequential equilibrium wage strategy is characterized by: (i) pooling by intermediate‐revenue employers on a common wage that just deters search, (ii) discontinuously lower revealing offers by low‐revenue employers for whom the benefit of deterring search fails to warrant the required high pooling wage and (iii) high revealing offers by high‐revenue employers seeking to deter aggressive raiders. Offres salariales et recherche d'emploi sur le lieu de travail. Dans cet article, nous étudions le problème de fixation des salaires lorsqu'un employeur dispose d'informations confidentielles concernant la demande pour ses produits et que les salariés peuvent se lancer dans une recherche d'emploi coûteuse sur leur lieu de travail. Les employeurs ont conscience que les offres salariales basses peuvent être annonciatrices de mauvaises nouvelles incitant les travailleurs à chercher un autre emploi. En matière de stratégie salariale, l'équilibre séquentiel parfait et unique consiste 1) pour les employeurs à revenu intermédiaire : à se regrouper autour d'un salaire commun permettant de dissuader les salariés de chercher un autre emploi; 2) pour les employeurs à faible revenu ne pouvant dissuader leurs employés de chercher un autre emploi : à diminuer les propositions salariales de façon discontinue de sorte que la fixation d'un salaire commun élevé requis cesse d'être justifiable; et 3) pour les employeurs à revenu élevés : à proposer des offres salariales avantageuses afin de dissuader le débauchage agressif de leurs salariés.

Suggested Citation

  • Tristan Potter & Dan Bernhardt, 2022. "Wage offers and on‐the‐job search," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(1), pages 74-105, February.
    • Handle: RePEc:wly:canjec:v:55:y:2022:i:1:p:74-105
    DOI: 10.1111/caje.12588
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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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