We develop a life-cycle model of the labor market in which di¤erent worker-…rm matches have di¤erent quality and the assignment of the right workers to the right …rms is time consuming because of search and learning frictions. The rate at which workers move between unemployment, employment and across di¤erent …rms is endogenous because search is directed and, hence, workers can choose whether to seek low-wage jobs that are easy to …nd or high-wage jobs that are hard to …nd. We calibrate our theory using data on labor market transitions aggregated across workers of di¤erent ages. We validate our theory by showing that it predicts quite well the pattern of labor market transitions for workers of di¤erent ages. Finally, we use our theory to decompose the age pro…les of transition rates, wages and productivity into the e¤ects of age variation in work-life expectancy, human capital and match quality.JEL Classi…cation: E24; J63; J64

In many markets, sellers advertise their good with an asking price. This is a price at which the seller will take his good off the market and trade immediately, though it is understood that a buyer can submit an offer below the asking price and that this offer may be accepted if the seller receives no better offers. We construct an environment with a few simple, realistic ingredients and demonstrate that, by using an asking price, sellers both maximize their revenue and implement the efficient outcome in equilibrium. We provide a complete characterization of this equilibrium and use it to explore the implications of this pricing mechanism for transaction prices and allocations.