Ex post bidding and efficient coordination unemployment

Abstract

We study the implementation of constrained-efficient allocations in labour markets where a basic coordination problem leads to an equilibrium matching friction. We argue that these allocations can be achieved in a non-cooperative equilibrium if wages are determined by ex post bidding. This holds true even in finite-sized markets where the equilibrium-matching process has decreasing returns to scale -where the 'Hosios rule' does not apply -both with and without heterogeneity. JEL classification: D83, J64Enche`re ex post et choˆmage efficient de coordination. Les auteurs e´tudient la mise en oeuvre d'allocations axe´es sur l'efficacite´dans des marche´s du travail ou`un proble`me fondamental de coordination engendre un e´quilibre frictionnel. On sugge`re qu'on peut atteindre ces allocations dans un e´quilibre sans coope´ration si les niveaux de salaires sont de´termine´s par des enche`res ex post. Cela demeure vrai meˆme dans des marche´s de taille finie ou`le processus d'e´quilibration fait l'expe´rience de rendements de´croissants a`l'e´chelle -la`ou`la re`gle d'Hosios ne s'applique pas -a`la fois quand il y a et qu'il n'y a pas d'he´te´roge´neite´.

On the Game‐theoretic Foundations of Competitive Search Equilibrium*

“…This result is of interest because it illustrates that the efficiency results prevalent in the literature (Moen, 1997; Shi, 2001; Shimer, 2005) are due to the combination of directed search with a large market and that directed search by itself does not deliver efficiency. We expect additional comparative statics and characterization results to be within reach, and conjecture that adaptations of our approach can be used to extend related finite settings such as Camera and Selcuk (2009), Geromichalos (2008), Julien et al (2005), and Lester (2010).…”

Directed Search: A Guided Tour

“…Clearly sellers accept the highest bid, unless they are all below cost, and buyers do not submit bids with  2 +  1  0, which would be rejected. Effectively this is like a first price auction with (Julien et al 2005). Finally, even if there is no penalty for lying, and messages are cheap talk, there is an still equilibrium where sellers truthfully reveal type.…”

On the Game-Theoretic Foundations of Competitive Search Equilibrium

“…Formally, in (6) the strictly negative term 2 ( 1 , 2 ) = (0) 2 is additionally introduced when firm 1 reduces its announcement. 15 If firm 1 increases its offer the market utility will increase, firm 2 will remain inactive and the supply of workers will be less elastic with respect to 1 . This means that the additional term does not appear in (6).…”

“…More precisely, it states that every firm is active in equilibrium, even 15 The term (0) is strictly negative: Since ( ) is strictly decreasing and continuously differentiable, we have (0) = lim ↘0 ′ ( ) ≤ 0. Moreover, the convexity of ( ) rules out that (0) = 0 as otherwise ( ) ≥ 0 for > 0, violating the assumption that ( ) is strictly decreasing.…”