Journal Article

Equilibrium Directed Search with Multiple Applications

James Albrecht, Pieter A. Gautier and Susan Vroman

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 73, issue 4, pages 869-891
Published in print October 2006 | ISSN: 0034-6527
Published online October 2006 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/j.1467-937X.2006.00400.x
Equilibrium Directed Search with Multiple Applications

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  • Particular Labour Markets
  • Mobility, Unemployment, and Vacancies

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We analyse a model of equilibrium directed search in a large labour market. Each worker, observing the wages posted at all vacancies, makes a fixed, finite number of applications, a. We allow for the possibility of ex post competition should more than one vacancy want to hire the same worker. For each a, there is a unique symmetric equilibrium in which all vacancies post the same wage. When a = 1, the common posted wage lies between the competitive and monopsony levels, and equilibrium is efficient. When a > 1, all vacancies post the monopsony wage. Some workers fail to find a job, some find a job at the monopsony wage, and some—those for whom there is competition—get the competitive wage. Equilibrium is inefficient when a > 1; in particular, there is excessive vacancy creation.

Keywords: J42; J63; J64

Journal Article.  13094 words.  Illustrated.

Subjects: Particular Labour Markets ; Mobility, Unemployment, and Vacancies

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