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Competition in a Posted-Salary Matching Market under Private Information

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  • Boosey Luke A.

    (Division of the Humanities and Social Sciences, California Institute of Technology, 1200 E. California Blvd. MC 228–77, Pasadena CA, 91125, USA Current address: Department of Economics, Florida State University, 288 Bellamy Building, Tallahassee FL, 32306–2180, USA)

Abstract

We study a posted-salary labor market in which firms engage in salary competition. Firms’ preferences over workers are private information, creating uncertainty about competitive pressure for different workers. We consider a baseline 2-firm, 2-worker model, then extend the analysis to larger markets by replicating the baseline. We characterize the unique Bayesian- Nash equilibrium, in which each firm type chooses a distributional strategy with interval support in the salary space. The main result shows that competition is localized, in the sense that firm types with a common most preferred worker choose non-overlapping, adjacent supports. We also provide numerical results to show that the equilibrium strategies in finite replicated markets converge to the corresponding equilibrium strategies in a market with a continuum of firms and workers.

Suggested Citation

  • Boosey Luke A., 2016. "Competition in a Posted-Salary Matching Market under Private Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(2), pages 599-631, June.
    • Handle: RePEc:bpj:bejtec:v:16:y:2016:i:2:p:599-631:n:8
    DOI: 10.1515/bejte-2015-0022
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    References listed on IDEAS

    as
    1. Julio González-Díaz & Ron Siegel, 2013. "Matching and price competition: beyond symmetric linear costs," International Journal of Game Theory, Springer;Game Theory Society, vol. 42(4), pages 835-844, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    salary competition; posted salary; two-sided markets; Bayesian games; replicated markets;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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