Self-Fulfilling Early-Contracting Rush

24 Pages Posted: 28 Mar 2004

See all articles by Hao Li

Hao Li

University of Toronto - Department of Economics; Queen's University - Department of Economics

Wing Suen

The University of Hong Kong - School of Economics and Finance

Abstract

In markets for entry-level professionals, the insurance motive drives some participants to sign early contracts. The rush to early contracting can be self-fulfilling, as both its effect on expectations about demand-supply balance in the subsequent spot market and the effect on it from changes in the demand-supply balance can be nonmonotone. Matching markets with more risk-averse participants, a greater uncertainty regarding relative supply of positions, or a more polarized distribution of applicant qualities are more vulnerable to self-fulfilling early-contracting rushes. Employers can have a collective interest in preventing early offers to a few promising applicants from starting the rushes.

Suggested Citation

Li, Hao and Suen, Wing C., Self-Fulfilling Early-Contracting Rush. International Economic Review, Vol. 45, pp. 301-324, February 2004. Available at SSRN: https://ssrn.com/abstract=513601

Hao Li (Contact Author)

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-5105 (Phone)

Queen's University - Department of Economics ( email )

Dunning Hall
Kingston, Ontario K7L 3N6
Canada
613-533-2275 (Phone)
613-533-6668 (Fax)

HOME PAGE: http://www.econ.queensu.ca/pub/faculty/li/

Wing C. Suen

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong
852 2859 1052 (Phone)
852 2548 1152 (Fax)

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