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Adverse Selection by Markets and the Advantage of Being Late

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  • J. Luis Guasch
  • Andrew Weiss

Abstract

Among firms entering a market sequentially, operating under imperfect information and hiring workers with the same observable characteristics, it is shown that in the presence of transaction costs or "lock-in" effects each new firm offers a wage above the one previously offered and obtains higher profits than previous entrants. On average, each new firm gets more able workers than the previous firms, and at any point in time those workers employed by firms are less able than those self-employed. Also, it is shown that a Nash equilibrium entry ordering for firms exits.

Suggested Citation

  • J. Luis Guasch & Andrew Weiss, 1980. "Adverse Selection by Markets and the Advantage of Being Late," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(3), pages 453-466.
    • Handle: RePEc:oup:qjecon:v:94:y:1980:i:3:p:453-466.
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    Cited by:

    1. Armbruster, Kathrin & Beckmann, Michael & Kuhn, Dieter, 2012. "Task Allocation and Corporate Performance : is There a First-Mover Advantage?," Working papers 2012/07, Faculty of Business and Economics - University of Basel.
    2. Dong‐Sing He & Imen Tebourbi, 2021. "Measuring the continuation effects of market order entry: A dynamic model," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 762-777, April.
    3. Barry Nalebuff & Andres Rodriguez & Joseph E. Stiglitz, 1993. "Equilibrium Unemployment as a Worker Screening Device," NBER Working Papers 4357, National Bureau of Economic Research, Inc.
    4. William Boulding & Markus Christen, 2008. "Disentangling Pioneering Cost Advantages and Disadvantages," Marketing Science, INFORMS, vol. 27(4), pages 699-716, 07-08.
    5. Deng, Ziliang & Wang, Zeyu, 2016. "Early-mover advantages at cross-border business-to-business e-commerce portals," Journal of Business Research, Elsevier, vol. 69(12), pages 6002-6011.
    6. Manant, Matthieu & Pajak, Serge & Soulié, Nicolas, 2014. "Do recruiters 'like' it? Online social networks and privacy in hiring: a pseudo-randomized experiment," MPRA Paper 56845, University Library of Munich, Germany.
    7. Manuel David Cruz, 2022. "Labor productivity, real wages, and employment: evidence from a panel of OECD economies over 1960-2019," Working Papers PKWP2203, Post Keynesian Economics Society (PKES).

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