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JOB SEARCH WITH BIDDER MEMORIES *
Author(s) -
CarrilloTudela Carlos,
Menzio Guido,
Smith Eric
Publication year - 2011
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2011.00643.x
Subject(s) - bidding , economic rent , recall , order (exchange) , microeconomics , labour economics , economics , business , psychology , finance , cognitive psychology
This article revisits the no‐recall assumption in job search models with take‐it‐or‐leave‐it offers. Workers who can recall previously encountered potential employers in order to engage them in Bertrand bidding have a distinct advantage over workers without such attachments. Firms account for this difference when hiring a worker. When a worker first meets a firm, the firm offers the worker a sufficient share of the match rents to avoid a bidding war in the future. The pair share the gains to trade. In this case, the Diamond paradox no longer holds.