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‘If You Believe That Discrimination Exists, It Will’*†

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  • ALI M. AHMED

Abstract

A model is presented where identical firms announce vacancies and wages and workers apply to the firm. Workers are of two types, b and g, but identical in productivity. Firms do not prefer a particular type of worker over another; however, a common belief among all workers is that type b workers are discriminated against. This causes type b workers to avoid applying for jobs that offer wages perceived to be too high. In equilibrium some firms announce high wages thereby attracting only type g workers, while others announce low wages thereby attracting only type b workers.

Suggested Citation

  • Ali M. Ahmed, 2008. "‘If You Believe That Discrimination Exists, It Will’*†," Manchester School, University of Manchester, vol. 76(6), pages 613-628, December.
    • Handle: RePEc:bla:manchs:v:76:y:2008:i:6:p:613-628
    DOI: 10.1111/j.1467-9957.2008.01085.x
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    References listed on IDEAS

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    1. Peters, Michael, 1984. "Bertrand Equilibrium with Capacity Constraints and Restricted Mobility," Econometrica, Econometric Society, vol. 52(5), pages 1117-1127, September.
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    Cited by:

    1. Julio J. Rotemberg, 2017. "Group Learning, Wage Dispersion and Non-stationary Offers," Economica, London School of Economics and Political Science, vol. 84(335), pages 365-392, July.
    2. Julio J. Rotemberg, 2012. "Prominent Job Advertisements, Group Learning and Wage Dispersion," NBER Working Papers 18638, National Bureau of Economic Research, Inc.

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