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Real-time search in the laboratory and the market

Author

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  • Meta Brown
  • Christopher J. Flinn
  • Andrew Schotter

Abstract

While widely accepted models of labor market search imply a constant reservation wage policy, the empirical evidence strongly suggests that reservation wages decline in the duration of search. This paper reports the results of the first real-time-search laboratory experiment. The controlled environment that subjects face is stationary, and the payoff-maximizing reservation wage is constant. Nevertheless, subjects' reservation wages decline sharply over time. We investigate two hypotheses to explain this decline: 1) searchers respond to the stock of accruing search costs, and 2) searchers experience nonstationary subjective costs of time spent searching. Our data support the latter hypothesis, and we substantiate this conclusion both experimentally and econometrically.

Suggested Citation

  • Meta Brown & Christopher J. Flinn & Andrew Schotter, 2009. "Real-time search in the laboratory and the market," Staff Reports 410, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:410
    Note: For a published version of this report, see Meta Brown, Christopher J. Flinn, and Andrew Schotter, "Real-Time Search in the Laboratory and the Market," American Economic Review 101, no. 2 (April 2011): 948-74.
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    References listed on IDEAS

    as
    1. Flinn, Christopher J & Heckman, James J, 1983. "Are Unemployment and Out of the Labor Force Behaviorally Distinct Labor Force States?," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 28-42, January.
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    More about this item

    Keywords

    job search; consumer search; reservation wage; experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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