Competing for Talent

52 Pages Posted: 30 Jan 2018 Last revised: 16 Mar 2018

See all articles by Yuhta Ishii

Yuhta Ishii

Pennsylvania State University

Aniko Oery

Yale University - Cowles Foundation

Adrien Vigier

University of Oxford - Department of Economics

Date Written: January 29, 2018

Abstract

In many labor markets, e.g., for lawyers, consultants, MBA students, and professional sport players, workers get offered and sign long-term contracts even though waiting could reveal significant information about their capabilities. This phenomenon is called unraveling. We examine the link between wage bargaining and unraveling. Two firms, an incumbent and an entrant, compete to hire a worker of unknown talent. Informational frictions prevent the incumbent from always observing the entrant’s arrival, inducing unraveling in all equilibria. We analyze the extent of unraveling, surplus shares, the average talent of employed workers, and the distribution of wages within and across firms.

Keywords: Unraveling, Talent, Wage Bargaining, Competition, Uncertainty

JEL Classification: C7, D8, J3

Suggested Citation

Ishii, Yuhta and Oery, Aniko and Vigier, Adrien, Competing for Talent (January 29, 2018). Cowles Foundation Discussion Paper No. 2119, Available at SSRN: https://ssrn.com/abstract=3112837 or http://dx.doi.org/10.2139/ssrn.3112837

Yuhta Ishii

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States

Aniko Oery (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States

Adrien Vigier

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

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