Adverse selection and unraveling in common-value labor markets

Jeffrey C. Ely*, Ron Siegel

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

We investigate a common-value labor setting in which firms interview a worker prior to hiring. When firms have private information about the worker's value and interview decisions are kept private, many firms may enter the market, interview, and hire with positive probability. When firms' interview decisions are revealed, severe adverse selection arises. As a result, all firms except for the highest-ranked firm are excluded from the hiring process.

Original languageEnglish (US)
Pages (from-to)801-827
Number of pages27
JournalTheoretical Economics
Volume8
Issue number3
DOIs
StatePublished - Sep 1 2013

Keywords

  • Adverse selection
  • D02
  • D82
  • Interviews
  • J44
  • Unraveling

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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