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Conformity in search markets

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Abstract

We study how private information is used in a search market with non-transferable utility. We show that competitive pressure can turn privately informed agents into "yes men" who, against their own better judgement, mimic behavior that prior information suggests is more valuable. This is more likely to happen when prior, public information is strong relative to private information. The result is not enough frictional unemployment and search, and too much employment in activities favored by prior information. Moreover, the "yes-man" incentive grows stronger when private information is more persistent: we are more likely to lie about what we are than about what we know.

Suggested Citation

  • Ingmar Nyman & Matthew Baker, 2008. "Conformity in search markets," Economics Working Paper Archive at Hunter College 422, Hunter College Department of Economics.
    • Handle: RePEc:htr:hcecon:422
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    References listed on IDEAS

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    More about this item

    Keywords

    Search; Non-Transferable Utility; Conformity; Yes Men;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • 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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