Efficient Cheap Talk in Directed Search: On the Non-essentiality of Commitment in Market Games
Directed search models are market games in which each firm announces a wage commitment to attract a worker. Miscoordination among workers generates search frictions, yet in equilibrium more productive firms post more attractive wage commitments to fill their vacancies faster, which yields constrained efficient outcomes. We show that commitment is not essential: Exactly the same efficient allocation can be sustained when announcements are pure cheap talk followed by a suitable subsequent wage-formation stage. The insights from existing commitment models extend unchanged to such a cheap-talk environment, even when workers differ in outside opportunities or observable common productivity.
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- Guido Menzio & Shouyong Shi, 2008.
"Efficient Search on the Job and the Business Cycle,"
tecipa-327, University of Toronto, Department of Economics.
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- Guido Menzio & Shouyong Shi, 2009. "Efficient Search on the Job and the Business Cycle," NBER Working Papers 14905, National Bureau of Economic Research, Inc.
- Guido Menzio & Shouyong Shi, 2008. "Efficient Search on the Job and the Business Cycle," PIER Working Paper Archive 08-029, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- Guido Menzio & Shouyong Shi, 2011. "Efficient Search on the Job and the Business Cycle," Working Papers tecipa-437, University of Toronto, Department of Economics.
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- repec:oup:restud:v:69:y:2002:i:2:p:467-91 is not listed on IDEAS
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