Wage Bargaining with Direct Competition and Heterogeneous Access to Vacancies

Agents with a richer set of opportunities to trade should be able to demand better terms of trade. For instance, workers who are otherwise equally-qualified may differ in their access to vacancies, e.g. because their social networks are larger or smaller. We present a model of search and matching in which multiple workers may be matched to the same vacancy, and workers compete directly in the wage bargining process. Workers with greater access have a higher dynamic outside option and demand higher wages. They are therefore unsuccessful candidates in some matches; this latter outcome is not possible in existing models based on Nash bargaining to determine wages. In particular, when markets are tight and the expected length of a position is short, workers with better access to opportunities will remain unemployed longer than those with less access.