Competing for Talent
Aniko Öry and
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Yuhta Ishii: Centro de Investigaci´on Econ´omica, Mexico
Adrien Vigier: BI Norwegian Business School
No 2119, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University
In many labor markets, e.g., for lawyers, consultants, MBA students, and professional sport players, workers get offered and sign long-term contracts even though waiting could reveal significant information about their capabilities. This phenomenon is called unraveling. We examine the link between wage bargaining and unraveling. Two firms, an incumbent and an entrant, compete to hire a worker of unknown talent. Informational frictions prevent the incumbent from always observing the entrant’s arrival, inducing unraveling in all equilibria. We analyze the extent of unraveling, surplus shares, the average talent of employed workers, and the distribution of wages within and across firms.
Keywords: Unraveling; Talent; Wage Bargaining; Competition; Uncertainty (search for similar items in EconPapers)
JEL-codes: C7 D8 J3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-gth and nep-lma
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