TY - JOUR
T1 - Multiple applications, competing mechanisms, and market power
AU - Albrecht, James
AU - Cai, Xiaoming
AU - Gautier, Pieter
AU - Vroman, Susan
PY - 2020/11
Y1 - 2020/11
N2 - We consider a labor market with search frictions in which workers make multiple applications and firms can post and commit to general mechanisms that may be conditioned both on the number of applications received and on the number of offers received by the firm's candidate. When the contract space includes application fees, there exists a continuum of symmetric equilibria of which only one is efficient, and it has a posted wage equal to match output. In the inefficient equilibria, the wage is below match output, and the value of a worker's application depends on whether he or she receives another offer. This allows individual firms to free ride on one another and gives firms market power. When we endogenize the number of applications and allow for general mechanisms, only the efficient equilibrium survives. By allowing for general mechanisms, we are able to examine the sources of inefficiency in the multiple applications literature.
AB - We consider a labor market with search frictions in which workers make multiple applications and firms can post and commit to general mechanisms that may be conditioned both on the number of applications received and on the number of offers received by the firm's candidate. When the contract space includes application fees, there exists a continuum of symmetric equilibria of which only one is efficient, and it has a posted wage equal to match output. In the inefficient equilibria, the wage is below match output, and the value of a worker's application depends on whether he or she receives another offer. This allows individual firms to free ride on one another and gives firms market power. When we endogenize the number of applications and allow for general mechanisms, only the efficient equilibrium survives. By allowing for general mechanisms, we are able to examine the sources of inefficiency in the multiple applications literature.
KW - Competing mechanisms
KW - Directed search
KW - Efficiency
KW - Market power
KW - Multiple applications
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U2 - 10.1016/j.jet.2020.105121
DO - 10.1016/j.jet.2020.105121
M3 - Article
AN - SCOPUS:85092075015
VL - 190
SP - 1
EP - 39
JO - Journal of Economic Theory
JF - Journal of Economic Theory
SN - 0022-0531
M1 - 105121
ER -