Information, bilateral negotiations, and worker recruitment

Arthur Schram; Jordi Brandts; Klarita Gërxhani

doi:10.1016/j.euroecorev.2010.03.003

Information, bilateral negotiations, and worker recruitment

Arthur Schram^*
, Jordi Brandts
, Klarita Gërxhani

^*Corresponding author for this work

Research output: Contribution to Journal › Article › Academic › peer-review

Abstract

This paper studies experimentally how firms choose between using a centralized market and bilateral negotiations to recruit new personnel. In the market firms interact with several workers but do not have information about workers' behavior in the past. In the bilateral negotiations firms negotiate bilaterally with prospective workers and learn about workers' performance in previous jobs. We show that the interaction between social preferences, the incompleteness of contracts and the existence of information about a worker's past performance provides an explanation for firms forgoing market opportunities and bilaterally negotiating with a worker. We observe that approximately 30% of all job contracts were bilaterally negotiated when these contracts are incomplete as opposed to only 10% when contracts were complete. The surplus from trade is higher when incomplete contracts can be bilaterally negotiated, which can be attributed to the presence of information.

Original language	English
Pages (from-to)	1035-1058
Number of pages	24
Journal	European Economic Review
Volume	54
Issue number	8
DOIs	https://doi.org/10.1016/j.euroecorev.2010.03.003
Publication status	Published - Nov 2010
Externally published	Yes

Bibliographical note

Funding Information:
Financial support by Netherlands Organization for Scientific Research (VENI Grant 451-04-106 ), the Spanish Ministerio de Ciencia e Innovación, the Barcelona GSE Recognition of Research Program and Consolider-Ingenio 2010 (CSD2006-00016) is gratefully acknowledged. Remaining errors are ours.

Funding

Financial support by Netherlands Organization for Scientific Research (VENI Grant 451-04-106 ), the Spanish Ministerio de Ciencia e Innovación, the Barcelona GSE Recognition of Research Program and Consolider-Ingenio 2010 (CSD2006-00016) is gratefully acknowledged. Remaining errors are ours.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth

Keywords

Bilateral negotiations
Experiments
Indirect reciprocity
Labor markets
Worker recruitment

Access to Document

10.1016/j.euroecorev.2010.03.003

Persistent URL (handle)

Persistent link

Cite this

@article{e91db3bee01b46faad84c2704ef791fa,

title = "Information, bilateral negotiations, and worker recruitment",

abstract = "This paper studies experimentally how firms choose between using a centralized market and bilateral negotiations to recruit new personnel. In the market firms interact with several workers but do not have information about workers' behavior in the past. In the bilateral negotiations firms negotiate bilaterally with prospective workers and learn about workers' performance in previous jobs. We show that the interaction between social preferences, the incompleteness of contracts and the existence of information about a worker's past performance provides an explanation for firms forgoing market opportunities and bilaterally negotiating with a worker. We observe that approximately 30\% of all job contracts were bilaterally negotiated when these contracts are incomplete as opposed to only 10\% when contracts were complete. The surplus from trade is higher when incomplete contracts can be bilaterally negotiated, which can be attributed to the presence of information.",

keywords = "Bilateral negotiations, Experiments, Indirect reciprocity, Labor markets, Worker recruitment",

author = "Arthur Schram and Jordi Brandts and Klarita G{\"e}rxhani",

note = "Funding Information: Financial support by Netherlands Organization for Scientific Research (VENI Grant 451-04-106 ), the Spanish Ministerio de Ciencia e Innovaci{\'o}n, the Barcelona GSE Recognition of Research Program and Consolider-Ingenio 2010 (CSD2006-00016) is gratefully acknowledged. Remaining errors are ours. ",

year = "2010",

month = nov,

doi = "10.1016/j.euroecorev.2010.03.003",

language = "English",

volume = "54",

pages = "1035--1058",

journal = "European Economic Review",

issn = "0014-2921",

publisher = "Elsevier B.V.",

number = "8",

}

TY - JOUR

T1 - Information, bilateral negotiations, and worker recruitment

AU - Schram, Arthur

AU - Brandts, Jordi

AU - Gërxhani, Klarita

N1 - Funding Information: Financial support by Netherlands Organization for Scientific Research (VENI Grant 451-04-106 ), the Spanish Ministerio de Ciencia e Innovación, the Barcelona GSE Recognition of Research Program and Consolider-Ingenio 2010 (CSD2006-00016) is gratefully acknowledged. Remaining errors are ours.

PY - 2010/11

Y1 - 2010/11

N2 - This paper studies experimentally how firms choose between using a centralized market and bilateral negotiations to recruit new personnel. In the market firms interact with several workers but do not have information about workers' behavior in the past. In the bilateral negotiations firms negotiate bilaterally with prospective workers and learn about workers' performance in previous jobs. We show that the interaction between social preferences, the incompleteness of contracts and the existence of information about a worker's past performance provides an explanation for firms forgoing market opportunities and bilaterally negotiating with a worker. We observe that approximately 30% of all job contracts were bilaterally negotiated when these contracts are incomplete as opposed to only 10% when contracts were complete. The surplus from trade is higher when incomplete contracts can be bilaterally negotiated, which can be attributed to the presence of information.

AB - This paper studies experimentally how firms choose between using a centralized market and bilateral negotiations to recruit new personnel. In the market firms interact with several workers but do not have information about workers' behavior in the past. In the bilateral negotiations firms negotiate bilaterally with prospective workers and learn about workers' performance in previous jobs. We show that the interaction between social preferences, the incompleteness of contracts and the existence of information about a worker's past performance provides an explanation for firms forgoing market opportunities and bilaterally negotiating with a worker. We observe that approximately 30% of all job contracts were bilaterally negotiated when these contracts are incomplete as opposed to only 10% when contracts were complete. The surplus from trade is higher when incomplete contracts can be bilaterally negotiated, which can be attributed to the presence of information.

KW - Bilateral negotiations

KW - Experiments

KW - Indirect reciprocity

KW - Labor markets

KW - Worker recruitment

UR - https://www.scopus.com/pages/publications/77958151629

UR - https://www.scopus.com/pages/publications/77958151629#tab=citedBy

U2 - 10.1016/j.euroecorev.2010.03.003

DO - 10.1016/j.euroecorev.2010.03.003

M3 - Article

AN - SCOPUS:77958151629

SN - 0014-2921

VL - 54

SP - 1035

EP - 1058

JO - European Economic Review

JF - European Economic Review

IS - 8

ER -

Information, bilateral negotiations, and worker recruitment

Abstract

Bibliographical note

Funding

UN SDGs

Keywords

Access to Document

Persistent URL (handle)

Other files and links

Cite this