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Wage Bargaining with Direct Competition and Heterogeneous Access to Vacancies

  • Adalbert Mayer

    (Washington College)

  • Theodore L. Turocy

    (University of East Anglia)

Agents with a richer set of opportunities to trade should be able to demand better terms of trade. For instance, workers who are otherwise equally-qualified may differ in their access to vacancies, e.g. because their social networks are larger or smaller. We present a model of search and matching in which multiple workers may be matched to the same vacancy, and workers compete directly in the wage bargining process. Workers with greater access have a higher dynamic outside option and demand higher wages. They are therefore unsuccessful candidates in some matches; this latter outcome is not possible in existing models based on Nash bargaining to determine wages. In particular, when markets are tight and the expected length of a position is short, workers with better access to opportunities will remain unemployed longer than those with less access.

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Paper provided by School of Economics, University of East Anglia, Norwich, UK. in its series University of East Anglia Applied and Financial Economics Working Paper Series with number 052.

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Date of creation: Dec 2013
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Handle: RePEc:uea:aepppr:2012_52
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  1. Kultti, K.K., 1997. "A Model of Random Matching and Price Formation," Discussion Paper 1997-32, Tilburg University, Center for Economic Research.
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  3. Francois Fontaine, 2004. "Why are similar workers paid differently? The role of social networks," 2004 Meeting Papers 493, Society for Economic Dynamics.
  4. Bart Hobijn & Aysegül Sahin, 2007. "Job-finding and separation rates in the OECD," Staff Reports 298, Federal Reserve Bank of New York.
  5. Calvó-Armengol, Antoni & Zenou, Yves, 2001. "Job Matching, Social Network and Word-of-Mouth Communication," Seminar Papers 695, Stockholm University, Institute for International Economic Studies.
  6. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  7. Galenianos, Manolis, 2014. "Hiring through referrals," Journal of Economic Theory, Elsevier, vol. 152(C), pages 304-323.
  8. Yannis M. Ioannides & Linda Datcher Loury, 2002. "Job Information Networks, Neighborhood Effects and Inequality," Discussion Papers Series, Department of Economics, Tufts University 0217, Department of Economics, Tufts University.
  9. Satterthwaite, Mark & Shneyerov, Art, 2004. "Dynamic Matching,Two-sided Incomplete Information, and Participation Costs: Existence and Convergence to Perfect Competition," Microeconomics.ca working papers shneyerov-04-12-17-02-54-, Vancouver School of Economics, revised 17 Dec 2004.
  10. Montgomery, James D, 1991. "Social Networks and Labor-Market Outcomes: Toward an Economic Analysis," American Economic Review, American Economic Association, vol. 81(5), pages 1407-18, December.
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