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Wage Posting Without Full Commitment

Matthew Doyle () and Jacob Wong ()

Review of Economic Dynamics, 2013, vol. 16, issue 2, 231-252

Abstract: Wage posting models of job search typically assume that firms can commit to paying workers exactly the posted wage. We relax this assumption and impose "downward" commitment; firms can commit only to paying at least their advertised wage. As each firm can only commit to pay at least their advertised wage, workers may demand that the firm pay more than the advertised wage. In labour markets with a finite number of workers and firms, the strategic interaction between firms makes it costly for firms to provide applicants the incentive not to demand wages in excess of the advertised wage. In equilibrium, firms may settle for running job auctions at the cost of losing control of the number of applicants that they can attract. When this strategic interaction between firms vanishes, workers never choose to demand more than the advertised wage. (Copyright: Elsevier)

Keywords: Directed search; commitment; wage posting (search for similar items in EconPapers)
JEL-codes: E24 J54 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Wage Posting Without Full Commitment (2008) Downloads
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DOI: 10.1010/j.red.2012.12.002

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