Conformity in search markets

Ingmar Nyman () and Matthew Baker

No 422, Economics Working Paper Archive at Hunter College from Hunter College Department of Economics

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.

Keywords: Search; Non-Transferable Utility; Conformity; Yes Men (search for similar items in EconPapers)
JEL-codes: D82 D83 J64 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cta, nep-lab and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:htr:hcecon:422

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