Simultaneous Search with Heterogeneous Firms and Ex Post Competition

Pieter Gautier and Ronald Wolthoff

No 6169, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study a search model where workers can apply to high and or low productivity firms. Firms that compete for the same candidate can increase their wage offers as often as they like. We show that if workers apply to two jobs, there is a unique symmetric equilibrium where workers mix between sending both applications to the high and sending both to the low productivity sector. But, efficiency requires that they apply to both sectors because a higher matching rate in the high-productivity sector can then be realized with fewer applications (and consequently fewer coordination frictions) if workers always accept the offer of the most productive sector. However, in the market the worker's payoff is determined by how much the firm with the second highest productivity is willing to bid. This is what prevents them from applying to both sectors. For many configurations, the equilibrium outcomes are the same under directed and random search. Allowing for free entry creates a second source of inefficiency. We discuss the effects of increasing the number of applications and show that our results can easily be generalized to N-firms.

Keywords: Simultaneous search; Directed search; Efficiency; Heterogeneous firms (search for similar items in EconPapers)
JEL-codes: D83 E24 J23 J24 J64 (search for similar items in EconPapers)
Date: 2007-03
New Economics Papers: this item is included in nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Simultaneous search with heterogeneous firms and ex post competition (2009)
Working Paper: Simultaneous Search with Heterogeneous Firms and Ex Post Competition (2006)
Working Paper: Simultaneous Search with Heterogeneous Firms and Ex Post Competition (2006)
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