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Commitment, advertising and efficiency of two-sided investment in competitive search equilibrium

  • Adrian Masters

    (University at Albany, SUNY)

This paper examines the role of commitment and advertising in the labor market for the determination of the levels of wages, human capital and physical capital. In a competitive search framework it is shown that when the characteristics of jobs or workers become common knowledge (so that the other side of the market can use those characteristics as a basis for search) the efficient outcome pertains. Which side of the market advertises a particular characteristic (or a requirement for that characteristic) does not matter for the outcomes. When there is no wage commitment but investments are common knowledge the Hosios condition is shown to bring about efficiency on every margin.

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File URL: https://www.economicdynamics.org/meetpapers/2008/paper_260.pdf
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Paper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 260.

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Date of creation: 2008
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Handle: RePEc:red:sed008:260
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  1. Veronica Guerrieri & Robert Shimer & Randall Wright, 2010. "Adverse Selection in Competitive Search Equilibrium," Econometrica, Econometric Society, vol. 78(6), pages 1823-1862, November.
  2. Manolis Galenianos & Philipp Kircher, 2005. "Directed Search with Multiple Job Applications," PIER Working Paper Archive 05-022, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. George J. Mailath & Andrew Postlewaite & Larry Samuelson, 2010. "Pricing in Matching Markets," Cowles Foundation Discussion Papers 1752, Cowles Foundation for Research in Economics, Yale University.
  4. Acemoglu, Daron, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 779-804, August.
  5. Shi, Shouyong, 2001. "Frictional Assignment. I. Efficiency," Journal of Economic Theory, Elsevier, vol. 98(2), pages 232-260, June.
  6. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  7. Daron Acemoglu & Robert Shimer, 1998. "Holdups and Efficiency with Search Frictions," Working papers 98-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  8. Shouyong Shi, 2002. "Frictional Assignment, Part II: Infinite Horizon and Inequality," Working Papers shouyong-02-01, University of Toronto, Department of Economics.
  9. Guido Menzio, 2007. "A Theory of Partially Directed Search," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 748-769, October.
  10. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  11. Moen, Espen R, 1999. "Education, Ranking, and Competition for Jobs," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 694-723, October.
  12. Guillaume Rocheteau & Randall Wright, 2004. "Money in search equilibrium, in competitive equilibrium, and in competitive search equilibrium," Working Paper 0405, Federal Reserve Bank of Cleveland.
  13. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  14. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  15. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  16. Philipp Kircher & Jan Eeckhout, 2008. "Prices as Optimal Competitive Sales Mechanisms," 2008 Meeting Papers 504, Society for Economic Dynamics.
  17. Veronica Guerrieri, 2008. "Inefficient Unemployment Dynamics under Asymmetric Information," Journal of Political Economy, University of Chicago Press, vol. 116(4), pages 667-708, 08.
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