Discussion Paper Details

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Title: Simultaneous Search and Network Efficiency

Author(s): Pieter A. Gautier and Christian Holzner

Publication Date: August 2011

Keyword(s): Efficiency, network clearing, random bipartite network formation and simultaneous search

Programme Area(s): Labour Economics

Abstract: When workers send applications to vacancies they create a network. Frictions arise if workers do not know where other workers apply to (this affects network creation) and firms do not know which candidates other firms consider (this affects network clearing). We show that those frictions and the wage mechanism are in general not independent. Equilibria that exhibit wage dispersion are inefficient in terms of network formation. Under complete recall (firms can go back and forth between all their candidates) only wage mechanisms that allow for ex post Bertrand competition generate the maximum matching on a realized network.

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Bibliographic Reference

Gautier, P and Holzner, C. 2011. 'Simultaneous Search and Network Efficiency'. London, Centre for Economic Policy Research.