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Wage Posting Without Full Commitment

Matthew Doyle () and Jacob Wong ()

No 8004, Working Papers from University of Waterloo, Department of Economics

Abstract: Wage posting models of job search typically assume that firms can commit to paying workers the posted wage. This paper investigates the consequences of relaxing this assumption. Under "downward" commitment firms can commit only to paying at least their advertised wage. We show that wage posting is always an equilibrium, although in special cases other equilibria can exist. Surprisingly, the wage posting equilibrium in our economy is identical to the equilibrium when firms can commit to paying exactly their posted wage. When firms cannot even commit to paying at least their advertised wage, equilibrium exhibits job auctions with wage dispersion which generally are not constrained efficient.

Keywords: directed search; wage posting; job auctions; commitment (search for similar items in EconPapers)
JEL-codes: C78 D40 J64 (search for similar items in EconPapers)
Date: 2008-08
New Economics Papers: this item is included in nep-bec, nep-dge and nep-lab
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Journal Article: Wage Posting Without Full Commitment (2013) Downloads
Working Paper: Wage Posting Without Full Commitment (2008) Downloads
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