Working Paper: CEPR ID: DP10579
Authors: Yizhaq Minchuk; Aner Sela
Abstract: We study a two-stage sequential search model with two agents who compete for one job. The agents arrive sequentially, each one in a different stage. The agents' abilities are private information and they are derived from heterogeneous distribution functions. In each stage the designer chooses an ability threshold. If an agent has a higher ability than the ability threshold in the stage in which he arrives, he gets the job and the search is over. We analyze the equilibrium ability thresholds imposed by the designer who wishes to maximize the ability of the agent who gets the job minus the search cost. We also investigate the ratio of the equilibrium ability thresholds as well as the optimal allocation of agents in both stages according to the agents' distributions of abilities.
Keywords: asymmetric information; sequential search
JEL Codes: D11; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| equilibrium ability threshold in the first stage (d1) (C62) | equilibrium ability threshold in the second stage (d2) (C62) |
| stronger agent arriving in the second stage (Y50) | lower threshold than weaker agent (D82) |
| distributions of abilities in one model stochastically dominate those in another (C52) | equilibrium thresholds differ (C62) |
| search cost varies (J32) | equilibrium thresholds can change direction (C62) |
| equilibrium ability thresholds (C62) | expected payoff of the designer (C78) |