Interviews and Adverse Selection

Jens Josephson and Joel Shapiro

No 6837, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Interviewing in professional labour markets is a costly process for firms. Moreover, poor screening can have a persistent negative impact on firms' bottom lines and candidates' careers. In a simple dynamic model where firms can pay a cost to interview applicants who have private information about their own ability, potentially large inefficiencies arise from information-based unemployment, where able workers are rejected by firms because of their lack of offers in previous interviews. This effect may make the market less efficient than random matching. We show that the first best can be achieved using either a mechanism with transfers or one without transfers.

Keywords: Asymmetric Information; Decentralized Labour Markets; Interview costs; Matching; Professional Labour Markets (search for similar items in EconPapers)
JEL-codes: D82 J21 J44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta
Date: 2008-05
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