Wage Bargaining in a Multiple Application Search Model with Recall (original) (raw)

In this paper I extend the multiple application urn-ball game structure, introduced by Gautier and Moraga-Gonzalez (2004) and Albrecht, Gautier, and Vroman (2006), to an scenario where firms can, after a rejection, make additional wage offers. This expands the game structure from a one-shot set up to a sequential game. A firm, after being rejected by an applicant, can choose another applicant to make him a new wage o¤er. This possibility gives firms an outside option after a rejection. This increases the bargaining power of firms, implying a change in their wage offer behavior. The resulting wage distribution is hump-shaped with the density of wage offers concentrated on central values, rather than in extreme values.