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JOB SEARCH WITH BIDDER MEMORIES

Authors

  • Carlos Carrillo-Tudela,

    1. University of Essex, U.K.; University of Pennsylvania, U.S.A.; University of Essex, U.K., Federal Reserve Bank of Atlanta, U.S.A.
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  • Guido Menzio,

    1. University of Essex, U.K.; University of Pennsylvania, U.S.A.; University of Essex, U.K., Federal Reserve Bank of Atlanta, U.S.A.
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  • Eric Smith

    1. University of Essex, U.K.; University of Pennsylvania, U.S.A.; University of Essex, U.K., Federal Reserve Bank of Atlanta, U.S.A.
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    • We would like to thank Randall Wright, Pieter Gautier, James Albrecht, and Leo Kaas for their helpful insights. This article has also benefited from comments and suggestions of participants in seminars at the University of Leicester, University of Konstanz, FRB Atlanta, FRB Cleveland, Tinbergen Institute, University of Rochester, the “Search and Matching” workshop held at the FRB Philadelphia, and at the “Micro and Macro Perspectives on the Aggregate Labor Market” NBER conference held at the FRB Atlanta. All errors are our responsibility. Please address correspondence to: Eric Smith, Department of Economics, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ, UK. E-mail: esmith@essex.ac.uk.


  • Manuscript submitted in July 2009.

Abstract

This article revisits the no-recall assumption in job search models with take-it-or-leave-it offers. Workers who can recall previously encountered potential employers in order to engage them in Bertrand bidding have a distinct advantage over workers without such attachments. Firms account for this difference when hiring a worker. When a worker first meets a firm, the firm offers the worker a sufficient share of the match rents to avoid a bidding war in the future. The pair share the gains to trade. In this case, the Diamond paradox no longer holds.

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