Publication Type

Journal Article

Publication Date

5-2012

Abstract

We consider a directed search model with risk-averse workers and risk-neutral entrepreneurs who can set up firms that post wage-vacancy contracts, i.e., contracts where firms can make payments to more than one applicant, and where the payments can be different for each applicant and be contingent on the number of applicants. We establish that the type of contracts the literature focuses on are not offered if firms can post wage-vacancy contracts. We show that there exists an equilibrium satisfying a Monotonic Expected Utility property which is efficient. Furthermore, we investigate the role of wage-vacancy contracts on welfare and competition.

Keywords

Directed search, contracts, vacancies, risk sharing, competition

Discipline

Economic Theory | Entrepreneurial and Small Business Operations | Labor Economics

Research Areas

Applied Microeconomics

Publication

Journal of Economic Theory

Volume

147

Issue

3

First Page

1064

Last Page

1104

ISSN

0022-0531

Identifier

10.1016/j.jet.2012.01.014

Publisher

Elsevier

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.1016/j.jet.2012.01.014

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