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Bo Chen, South Methodist U. Print
Tuesday, 12 October 2010, 14:00 - 15:15

Decentralized Market Processes to Stable Job Matchings with Competitive Salaries

Bo Chen, South Methodist University

Abstract: We analyze a basic decentralized labor market in which firms and workers are heterogeneous, meet directly and randomly, and negotiate salaries with each other over time. Firms and workers may not have a complete picture of the entire market and can thus behave myopically. Our main result establishes that, starting from an arbitrary initial market state, there exists a finite sequence of successive myopic (firm-worker) pair or bilateral improvements leading to a stable matching between firms and workers with a scheme of competitive salary offers. An important implication of this result is that a general random process where every possible pair improvement is chosen with a positive probability converges with probability one to a competitive equilibrium of the labor market.

Location: R 42.2.103
Contact: Claude Adan, This e-mail address is being protected from spam bots, you need JavaScript enabled to view it