Equilibrium Directed Search with Multiple Applications

• Published in: The Review of economic studies Vol. 73; no. 4; pp. 869 - 891
• Main Authors: Albrecht, James, Gautier, Pieter A., Vroman, Susan
• Format: Journal Article
• Language: English
• Published: Oxford Wiley-Blackwell 01.10.2006; Review of Economic Studies Ltd; Oxford University Press
• Subjects: Competition; Economic competition; Economic equilibrium; Economic models; Efficient markets; Equilibrium; Equilibrium wages; J42; J63; J64; Job search; Labor market; Labor market equilibrium; Labor markets; Labour economics; Market equilibrium; Mathematical methods; Monopsony; Search theory; Studies; Unemployment; Wage rates; Wages; Wages & salaries
• ISSN: 0034-6527; 1467-937X
• DOI: 10.1111/j.1467-937X.2006.00400.x

We analyse a model of equilibrium directed search in a large labour market. Each worker, observing the wages posted at all vacancies, makes a fixed, finite number of applications, a. We allow for the possibility of ex post competition should more than one vacancy want to hire the same worker. For each a, there is a unique symmetric equilibrium in which all vacancies post the same wage. When a = 1, the common posted wage lies between the competitive and monopsony levels, and equilibrium is efficient. When a > 1, all vacancies post the monopsony wage. Some workers fail to find a job, some find a job at the monopsony wage, and some—those for whom there is competition—get the competitive wage. Equilibrium is inefficient when a > 1; in particular, there is excessive vacancy creation.