Strategic Wage Setting and Coordination Frictions with Multiple Applications

Arbeitspapier

We examine wage competition in a model where identical workers choose the number of jobs to apply for and identical firms simultaneously post a wage. The Nash equilibrium of this game exhibits the following properties: (i) an equilibrium where workers apply for just one job exhibits unemployment and absence of wage dispersion; (ii) an equilibrium where workers apply for two or for more (but not for all) jobs always exhibits wage dispersion and, typically, unemployment; (iii) the equilibrium wage distribution with a higher vacancy-to-unemployment ratio first-order stochastically dominates the wage distribution with a lower level of labor market tightness; (iv) the average wage is non-monotonic in the number of applications; (v) the equilibrium number of applications is non-monotonic in the vacancy-to-unemployment ratio; (vi) a minimum wage increase can be welfare improving because it compresses the wage distribution and reduces the congestion effects cause! d by the socially excessive number of applications; and (vii) the only way to obtain efficiency is to impose a mandatory wage that eliminates wage dispersion altogether.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 04-063/1

Classification and Topics

• Classification: Wirtschaft ; Externalities ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Labor Demand ; Labor Contracts ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: search ; wage setting ; coordination frictions ; wage dispersion ; Lohnbildung ; Tarifverhandlungen ; Nash-Gleichgewicht ; Verhandlungstheorie des Lohnes ; Arbeitsuche ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gautier, Pieter A. ; Moraga, Jose L.
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/86509
• Last update: 10.03.2025, 11:45 AM CET