Representation over Rents: Sorting in a Market for Lemons

Xiaoming Cai and Pieter Gautier
Additional contact information
Xiaoming Cai: Peking University HSBC Business School
Pieter Gautier: Vrije Universiteit Amsterdam

No 26-081/VI, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Search frictions normally raise the bar for sorting: both random and directed search require complementarities strictly stronger than the supermodularity that suffices in Becker's (1973) frictionless model. We introduce private information into this setting: firms post wages without observing worker productivity, while better workers have better outside options, creating a market for lemons (Akerlof 1970). We show that this information friction pushes sorting the other way: attracting high-productivity workers without attracting low-productivity ones requires a higher wage paired with a lower job-finding probability, so vacancies fill faster. This strict ranking of vacancy filling rates sorts the market positively whenever output is complementary in worker and firm quality. Becker's condition therefore suffices once more, and private information makes positive sorting easier to sustain than complete information does.

Keywords: Competitive search; adverse selection; screening; sorting; positive assortative matching (search for similar items in EconPapers)
Date: 2026-10-05
New Economics Papers: this item is included in nep-bec and nep-des
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.tinbergen.nl/26081.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20260081

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().