ECN 506 Lecture 18: ECN_CH18
Document Summary
Beliefs let vt denote the value of a vacant job at time t: (cid:0)(cid:0) Vt = k+ vt+1+maxq( i)[jt+1(wi) vt+1] i and jt(w) is the value of a filled job at wage w: (cid:0)(cid:0) Jt(w)=y w+ jt+1(w) [jt+1(w) vt+1] where y is the output produced per period when a job is filled. Beliefs: a firm chooses a submarket, (wi , i ), to maximize the value of a vacant job, equivalently, the firm posts a wage, w, taking into account how tightness, , is related to the wage. This relationship is determined by the search strategies of workers ! To capture this, suppose that firms expect each wage level to be associated with a market tightness by a function, Search is directed in the sense that, by posting a particular wage, a firm expects to change the matching probability by affecting workers" applications !
