Boundedly rational search with positive search costs

Dale Stahl

Economics Letters, 2018, vol. 168, issue C, 138-140

Abstract: There is substantial evidence that humans make mistakes, and that this deviation from perfect rationality can have profound behavioral consequences. Since search theory plays a central role in economic models, it is imperative that the consequences of bounded rationality for search be studied. In this paper, worker bounded rationality is modeled as probabilistic choice, while employers are assumed to be perfectly rational. We find that worker welfare is non-monotonic in the precision of the workers. Offers are higher, and workers are better off with moderate levels of precision than with very low or with very high levels of precision.

Keywords: Bounded rationality; Search; Labor market (search for similar items in EconPapers)
JEL-codes: D01 D83 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:168:y:2018:i:c:p:138-140

DOI: 10.1016/j.econlet.2018.04.035

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