Homogenous Agent Wage-Posting Model with Wage Dispersion

Steinbacher, Matej and Steinbacher, Matjaz and Steinbacher, Mitja (2009): Homogenous Agent Wage-Posting Model with Wage Dispersion.

Abstract

In the paper we test a homogenous agent version of the Montgomery's (1991) non-cooperative wage posting model. The inclusion of intrinsic costs, related to the uncertainty when changing the alternative agents are already using, alters the outcome of the model in two respects: firstly, it significantly prolongs the convergence-time to the equilibrium, and, more importantly, it may lead to the wage dispersion, irrespective of equally-productive-agent proposition, something not present in the model of Montgomery.

• Item Type: MPRA Paper
• Language: English
• Keywords: Job-search model, wage posting, wage dispersion, numerical optimization
• Subjects: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search ; Learning ; Information and Knowledge ; Communication ; Belief ; Unawareness; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games ; Evolutionary Games ; Repeated Games

References

Burdett, K, and K.L. Judd, 1983, Equilibrium Price Dispersion, Econometrica 51, 955-970.

Hirshleifer, D.A., 2001, Investor Psychology and Asset Pricing, Journal of Finance 56, 1533-1597.

Montgomery, J.D., 1991, Equilibrium Wage Dispersion and Interindustry Differentials, Quarterly Journal of Economics 106, 163-179.

Rubinstein, A., 1998, Modeling Bounded Rationality. (MIT Press, Cambridge).