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Social and Behavioral Sciences Commons

Open Access. Powered by Scholars. Published by Universities.®

2012

Business

Singapore Management University

Contracts

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Full-Text Articles in Social and Behavioral Sciences

Wage Vacancy Contracts And Coordination Frictions, Nicolas L. Jacquet, Serene Tan May 2012

Wage Vacancy Contracts And Coordination Frictions, Nicolas L. Jacquet, Serene Tan

Research Collection School Of Economics

We consider a directed search model with risk-averse workers and risk-neutral entrepreneurs who can set up firms that post wage-vacancy contracts, i.e., contracts where firms can make payments to more than one applicant, and where the payments can be different for each applicant and be contingent on the number of applicants. We establish that the type of contracts the literature focuses on are not offered if firms can post wage-vacancy contracts. We show that there exists an equilibrium satisfying a Monotonic Expected Utility property which is efficient. Furthermore, we investigate the role of wage-vacancy contracts on welfare and competition.